Topic: Illiquidity, Synergy, Control, Book Value, Sound Value, Liquidation Value, Income Approach, and Forex Translation

1. ABC Corporation acquired 100 ounces of gold as a long-term investment. The total amount invested is P8,500,000. Gold is expected to increase in prices by an average of 8% per year. ABC plans to hold this investment for 10 years but would incur P800,000 to sell it by that time. What is the rate of return that investors should expect for them to consider this investment acceptable?

2. A Corp. and B Company will be merging. Independently, A has forecasted annual earnings of P400,000 and overall return of 16%. On the other hand, B had dividends of P480,000 last year, an overall return of 15% and a payout ratio of 80%. Once combined, they will have a total equity value of P7,300,000. How much is thevalue of synergy between the two entities?