At the Time of Addison's Death, He Owned 70% of the Stock

question 78

Multiple Choice

At the time of Addison's death, he owned 70% of the stock in Robin Corporation, a closely held family business. Over the past five years, Robin has averaged annual profits of $400,000 in an industry where the typical after-tax rate of return is 9%. If the book value of the corporation's assets is $1,000,000 and goodwill exists, what might be a realistic value of the stock in Addison's gross estate?

• A) $310,000
• B) $1,550,000
• C) $1,785,000
• D) $2,550,000

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Definitions:

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Ground-Level Ozone

A harmful air pollutant formed by the reaction of sunlight with pollutants such as nitrogen oxides and volatile organic compounds, contributing to smog and adverse health effects.

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Natural fuels formed from the decayed remains of plants and animals over millions of years, including coal, oil, and natural gas.

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A species of bumblebee native to North America known for its distinctive white-tipped abdomen.