As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of Stow Company $0.50 in cash for every dollar of EBITDA above $5,500,000 reported at the end of the first year following acquisition. Parma projects the following EBITDA outcomes for the year:
EBITDAProbability
$3,500,000 ...................... 0.05
4,500,000 ........................ 0.30
5,500,000 ........................ 0.20
6,500,000 ........................ 0.25
7,500,000 ........................ 0.20