Use the Following Information for Questions

question 43

Multiple Choice

Use the following information for questions
Jeremiah Inc.is being targeted for acquisition by Argo Corporation.As an analyst for
Argo, you are asked to determine the goodwill that, pending various assumptions, may be inherent in this potential transaction.
The available information relating to Jeremiah includes the following: Current net assets: $5.1 million.
Expected return on net asset for industry: 10%
Reported net income for the previous six consecutive years:

The earnings for 2007 included a $200,000 gain from the sale of a discontinued part of its business.
-Assuming that excess earnings are expected to continue for 8 years, and average excess earnings are discounted at 11%, estimated goodwill is (use interest table)

• A)$1,784,331
• B)$1,661,432
• C)$1,462,356
• D)$1,290,818

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Definitions:

Backing Plate

A component of drum brakes that holds the brake assembly together against the drum.

Axle Assembly

A central component of most vehicles' wheel systems, joining the wheels on either side and often housing gears for transmitting torque from the engine.

Drum Brake Assembly

A type of brake system that uses brake shoes pressed outwards against a rotating drum to slow or stop a vehicle.

Non-servo Designs

Brake or other mechanical systems designed without the use of a servo mechanism, often simpler and requiring manual operation or greater force.