Use the Following Information for Questions $\quad$ $\quad$ $\quad$

question 98

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 aszete: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$5.1$ millien
Expected return on net assets for industry: $\quad$$\quad$$\quad$$\quad$$10 \%$ Reported net income for the previous six consecutive years:
$\begin{array}{llll}\text { YearAmount } &\text { Year }&\text { Amount } & \\2015 & \$ 710,000 & 2018 & \$ 745,000 \\2016 & \$ 680,000 & 2019 & \$ 815,000 \\2017 & \$ 980,000 & 2020 & \$ 835,000\end{array}$ Net income for 2020 included a $ 200,000 gain from the sale of a discontinued operation.
-Assuming that excess earnings are expected to continue for 8 years, and ignoring the time value of money, estimated goodwill is

• A) $ 2,273,000.
• B) $ 2,006,667.
• C) $ 1,854,333.
• D) $ 1,531,733.

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Definitions:

Trespass to Personal Property

The intentional interference with an individual's rightful possession of personal property without consent.

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A determination or resolve to perform an act for a specific purpose, often a crucial factor in legal analysis to establish wrongdoing or contractual agreements.

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A theory that applies Darwin's concept of natural selection to societies, suggesting that individuals or groups achieve advantage over others as a result of genetic or biological superiority.

Sociological Imagination

The ability to see the relationship between individual experiences and larger social influences, coined by C. Wright Mills.