Walter Liu has owned and operated LW Media Inc. since its beginning 10 years ago. Recently, Liu

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Walter Liu has owned and operated LW Media Inc. since its beginning 10 years ago. Recently, Liu mentioned that he would consider selling the company for the right price.
Assume that you are interested in buying this business. You obtain its most recent monthly trial balance, which follows. Revenues and expenses vary little from month to month, and June is a typical month. Your investigation reveals that the trial balance does not include the effects of monthly revenues of $5,000 and expenses totalling $1,100. If you were to buy LW Media Inc., you would hire a manager so you could devote your time to other duties. Assume that your manager would require a monthly salary of $6,000.
Requirements
1. Assume that the most you would pay for the business is 20 times the monthly net income you could expect to earn from it. Compute this possible price.
2. Walter Liu states that the least he will take for the business is 1.5 times shareholders' equity on June 30, 2014. Compute this amount.
3. Under these conditions, how much should you offer Liu? Give your reason.
Walter Liu has owned and operated LW Media Inc. since
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Financial Accounting

ISBN: 978-0133472264

5th Canadian edition

Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin

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