On January $1,2024,$ Delta Co$.$ is considering purchasing a $40\%$ ownership interest in Omega Co$.,$ a privately held enterprise, for $$700,000.$ Omega predicts its profit will be $$185,000$ in $2024,$ projects a $10\%$ annual increase in profits in each of the next four years, and expects to pay a steady annual dividend of $$30,000$ for the foreseeable future. Because Omega has on its books a patent that is undervalued by $$375,000,$ Delta realizes that it will have an additional amortization expense of $$15,000$ per year over the next $10$ years$-$ the patents estimated remaining useful life. Any remaining excess paid by Delta over Omega$$s fair value was attributable to indefinite$-$lived intangible assets. All of Omega$$s other assets and liabilities have book values that approximate market values. Delta uses the equity method for its investment in Omega.

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$1.$ Using an Excel spreadsheet, set the following values in cells:

a$.$ Delta$$s cost of investment

b$.$ Percentage acquired

c$.$ First$-$year Omega reported income

d$.$ Projected growth rate in income

e$.$ Omega annual dividends

f$.$ Annual excess patent amortization

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$2.$ Referring to the values in #$1,$ prepare the following schedules using columns for the years $2024$ through $2028$

a$.$ Deltas equity in Omega earnings with rows showing these:

$$ i$.$ Delta$$s share of Omega reported income

$$ ii$.$ Amortization expense

$$ iii.$$ Delta$$s equity in Omega earnings

b$.$ Delta$$s investment in Omega balance with rows showing the following:

$$ i$.$ Beginning balance

$$ ii$.$ Equity earnings

$$ iii.$$ Dividends

$$ iv$.$ Ending balance

c$.$ Return on beginning investment balance $=$ Equity earnings$/$Beginning investment balance in each year

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$3.$ Given the preceding values, compute the average of the projected returns on beginning investment balances for the first five years of Delta$$s investment in Omega. What is the maximum Delta can pay for Omega if it wishes to earn at least a $10\%$ average return on beginning investment balance over the next $5$ years? $($Hint: Under Excel$$s Tools tab, select the Goal Seek capability to produce a $10\%$ average return on beginning investment balance by changing the cell that contains Delta$$s cost of investment in Omega. Excel$$s Solver should produce an exact answer while Goal Seek should produce a close approximation. You may need to first add the Solver capability in Excel under Tools$>$Excel Add$-$ins.$)$