The Flower Company Is for Sale

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