The Flower Company Is for Sale

question 3

Multiple Choice

The Flower Company is for sale. The anticipated average profits for the next five years of the business have been calculated at $150,000. The business has been valued at $750,000 using the earnings method. The net tangible assets have been appraised at
$625,000. Which of the following is TRUE for the Flower Company?

• A)The company is expected to yield a 24% return for the purchaser, and goodwill of $475,000 is present.
• B)The company is expected to yield a 20% return for the purchaser, and goodwill of $125,000 is present.
• C)The company is expected to yield a 24% return for the purchaser, and goodwill of $125,000 is present.
• D)The company is expected to yield a 20% return for the purchaser, and the cost of the business is too low.

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Definitions:

Canada's Food Guide

A nutritional guide published by the Canadian government to provide recommendations on healthy eating for Canadians.

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The development phase of children typically aged 6-12 years, characterized by physical, cognitive, and emotional growth.

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Alterations in an individual's perception of their own worth, typically fluctuating due to external or internal factors.

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The composition and organization of a family unit, including its members and their relationships to each other.