WU oUW =+ wr ~ - T 3 View Policies Current Attempt in Progress Blossom Company is considering the acquisition of Nash, Inc. To assess the amount it might be willing to pay, Blossom makes the following computations and assumptions. A C. Nash, Inc. has identifiable assets with a total fair value of $6,001,500 and liabilities of $3,701,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 25% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Nash, Inc. Nash, Inc)s pretax incomes for the years 2020 through 2022 were $470,200, $570,400, and $370,100, respectively. Blossom believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments for the following items included in pretax earnings: Depreciation on Buildings (each year) 380,100 Depreciation on Equipment (each year) 30,100 Extraordinary Loss (year 2022) 130,100 Salary Expense (each year) 170,100 The normal rate of return on net assets for the industry is 15%. (a) Assume that Blossom feels that it must earn a 20% return on its investment, and that goodwill is determined by capitalizing excess earnings. Based on these assumptions, calculate a reasonable offering price for Nash, Inc. Indicate how much of the price consists of goodwill. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 58,971.) 5 128433 Goodwill Offering price $ 1046500 eTextbook and Media Save for Later Attempts: 0 of 2 used ST TFET (b) Assume that Blossom feels that it must earn a 15% return on its investment, but that average excess earnings are to be capitalized for five years only. Based on these assumptions, calculate a reasonable offering price for Mash, Inc. Indicate how much of the price consists of goodwill. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 58,971) Goodwill Offering price eTextbook and Media