PROBLEM NO. 2 In line with CANDLER COMPANY's expansion program, it has become interested in acquiring a plant in Mindanao to handle many of its production functions in that area. One prospective seller is Sayo Na Co. whose owners have decided to sell their business if a proper settlement can be obtained. Sayo Na Co.'s balance sheet appears as follows: Current assets P4,500,000 Current liabilities P2,400,000 Investments 1,500,000 Noncurrent liabilities 3,000,000 Property, plant, & equipment (net) Common stock 1,500,000 Equipment (net) 12,000,000 APIC 5,100,000 Retained earnings 6,000,000 Total assets P18,000,000 Total equities P18.000,000 CANDLER has hired Kilatis Appraisal Company to determine the proper price to pay for SAyo Na Co. The appraisal company finds that the investments have fair value of P4,500,000 and the inventory is understated by P2,400,000. All other assets and equities are properly stated. An examination of the company's income for the last 4 years indicates that the net income has steadily increased. In 2018, the company had a net operating income of P3,000,000, which is expected to increase 20% each year over the next 4 years. CANDLER believes that a normal return in this type of business is 18% on net assets. The asset investment in the Mindanao plant is expected to stay the same for the next 4 years. According to Kilatis Appraisal Company, the fair value of Sayo Na Co. can be estimated in many different ways. Calculate an estimate of the value of Sayo Na Co., assuming that any goodwill will be computed as: 1. The capitalization of the average excess earnings of Sayo Na Co. at 18%. A. P44,840,000 B. P36,000,000 C. P18,286,416 D. P26,840,000 2. The purchase of average excess earnings over the next four years. A. P24,364,800 B. P19,591,200 C. P30,960,000 D. P22,831,200 3. The capitalization of average excess earnings of Sayo Na Co. at 24%. A. P31,500,000 B. P24,630,000 C. P18,381,888 D. P98,520,200 4. The present value of the average excess earnings over the next four years discounted at 15%. (The present value of a ordinary annuity of 1 at 15% for 4 periods is 2.85498) A. P31,792,979 B. P55,932,484 C. P22,542,844 D. P27,250,135 5. If CANDLER were to pay P23,100,000 to purchase the assets and assume the liabilities of Sayo Na Co., how much would be charged to goodwill? A. P8,840,000 B. P6,364,800 C. PO D. P5,100,000