At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,600,000, and on the date of Chow’s death, the book value of its stock is $3,800,000. An appropriate rate of return for Finch’s business is 8%.

a. Assuming that goodwill exists, what is the value of the Finch stock?

b. What factors could be present to reduce the value of such goodwill?