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An entity is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation
An entity is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of the entity at current year end was P10,000,000.
1. What is the purchase price if goodwill is measured by capitalizing excess earnings at 25%? 2. What is the purchase price if goodwill is measured by capitalizing average annual earnings at 25%?
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