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At the Beginning of 2010, Rector Corporation Is Considering the Purchase

question 15

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At the beginning of 2010, Rector Corporation is considering the purchase of the Daphne Corporation.Daphne's recorded book value of its net assets is $390, 000, but the current market value of these net assets is $490, 000.In addition, the market value of an unrecorded identifiable intangible asset of the company is $75, 000.The estimated annual income of Daphne is $68, 000.The purchase price will be equal to the income is to be discounted in perpetuity at 10%.If Rector acquires Daphne, how much goodwill will be reported in the consolidated financial statements prepared at the end of 2010?


Definitions:

Dispersion

Measures the spread of a set of data points around their mean or median value.

Standard Deviation

A statistical measure that represents the dispersion or spread of a dataset relative to its mean, indicating how spread out the data points are.

Variance

A measure of the dispersion of a set of data points around their mean; conceptually, it's the average of the squared differences from the Mean.

Cash Flows

The total amount of money being transferred into and out of a business, determining its operating, investing, and financing activities' liquidity.

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