Question

Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $140,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyche's purchase of Trim?

Answer 1

Answer and Explanation:

Psyche

a b a×b

Years Net income PVF at 8% Goodwill

1 to 5 140000 3.99271 558979.4