Question 4: Goodwill (12 marks) Do questions and answer properly.

Question 4: Goodwill [12 marks] Argo Corporation is targeting Tiger Inc. for acquisition. As an analyst for Argo, you are aslted to determine the goodwill that, pending various assumptions, may be inherent in this potential transaction. The available infomialion relating to Tlger includes the folhwing: Current net assets: $5 million Expected return on net assets for industry 10% Reported net income for the previous six consecutive years: E".uEEE ems $T20,000 ems statistic 2014 $590,000 201? $800,000 2015 090,000 2018 $825,000 The earnings for 2o15 included a nalist] gain from the sale or a discontinued part of its business. Required: Answer the following questions and show your calculations. Round to the nearest dollar, no decirrals 3] Calculate the normal earnings the company would expect to earn using the industry average 0] Calculate the average earnings for the past 6 years c} What is the value of the excess earnings? d] What is estimated goodwill by capitalizing average excess earnings at 15% e] Assuming that excess earnings are expected to continue for 1'" years, and ignoling the time value of money, estimated goodwill is? f] Assuming that excess earnings are expected to oontinue for T years and average excess earnings are discounted at 12%, estimated goodwill is? {use nancial calculator or tables page reenter}