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 20% return for the purchaser, and is, therefore, a low risk investment.
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 24% return for the purchaser, and goodwill of $475,000 is present.
Correct Answer:
Verified
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