You have been asked to value Pacific Corporation, Inc , using an excess earnings method, given the following information Working capital balance $2,000,000 Fair value of fixed assets $5,500,000 Book value of fixed assets $4,000,000 Normalized earnings of firm $1,000,000 Required return on working c...

The excess earnings consist of any remaining income after returns to working capital and fixed asset ...

You have been asked to value Pacific Corporation, Inc., using an excess earnings method, given the following

Question:

You have been asked to value Pacific Corporation, Inc., using an excess earnings method, given the following information:

Working capital balance = $2,000,000
Fair value of fixed assets = $5,500,000
Book value of fixed assets = $4,000,000
Normalized earnings of firm = $1,000,000
Required return on working capital = 5.0 percent
Required return on fixed assets = 8.0 percent
Required return on intangible assets = 15.0 percent
Weighted average cost of capital = 10.0 percent
Long-term growth rate of residual income = 5.0 percent

Based on this information:
A. What is the value of Pacific’s intangible assets?
B. What is the market value of invested capital?

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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