Little Tech Limited was recently sold to Big Tech, another larger tech company in the same...

Transcribed Image Text:

Little Tech Limited was recently sold to Big Tech, another larger tech company in the same industry. Little Tech's normalized expected annual future earnings are estimated to be $250,000, with the fair value of its net identifiable assets at $975,000. The average industry ROI is 18%. Instructions What is the estimated value of the goodwill using the excess earnings approach assuming (show calculations) the following: a) Goodwill is equal to the average excess earnings capitalized at 20%. Goodwill: b) Goodwill is equal to the present value of 8 years of excess earnings capitalized at 15%? You may use the present value table of ordinary annuity at the end of the exam paper. Goodwill: Little Tech Limited was recently sold to Big Tech, another larger tech company in the same industry. Little Tech's normalized expected annual future earnings are estimated to be $250,000, with the fair value of its net identifiable assets at $975,000. The average industry ROI is 18%. Instructions What is the estimated value of the goodwill using the excess earnings approach assuming (show calculations) the following: a) Goodwill is equal to the average excess earnings capitalized at 20%. Goodwill: b) Goodwill is equal to the present value of 8 years of excess earnings capitalized at 15%? You may use the present value table of ordinary annuity at the end of the exam paper. Goodwill:

Answer rating: 100% (QA)

Calculating Goodwill for Little Tech a Goodwill based on average excess earnings capitalized at 20 C... View the full answer