Computation of Goodwill The Income of Greystone,Inc. ,During the Last Several Years Has

question 138

Essay

Computation of goodwill
The income of Greystone,Inc. ,during the last several years has averaged $765,000 annually.The company is now being offered for sale as a going concern.The value of Greystone's net identifiable assets (total assets minus all liabilities)at the present time is $4,675,000.
One of several corporations interested in buying Greystone,offers to pay an amount equal to the value of the net identifiable assets and to assume all liabilities.In addition,this prospective buyer is willing to pay for goodwill an amount equal to net earnings in excess of 10% on net assets,expected to continue four years.
You are to use the above information as a basis for computing the price that the investing corporation will offer for Greystone,Inc.$________

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Definitions:

Brand Name

A Brand Name is a distinctive title given to a product or service by its manufacturer, which becomes its identity and differentiates it from competitors in the market.

Retailer

An enterprise that offers products to consumers in small amounts for personal use or consumption, instead of for selling again.

Marketing Communications

The various methods and channels a company uses to communicate with its market, providing information about its products or services to generate sales.

Consumer's Purchase

The act of a consumer buying a product or service, representing the final step in the buying decision process.