Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Based on the information provided in the screenshot below, I need to either use the Goal Seek or Solver tool in Excel to figure out
Based on the information provided in the screenshot below, I need to either use the Goal Seek or Solver tool in Excel to figure out the maximum amount Acme can pay for PHC if it wishes to maintain at least at 10% average return on beginning investment allowance. If someone could provide an explanation on how to use solver/goal seek to find the answer, I would be grateful!
(1) Preliminary Information Acme Co Investor PHC Co. Investee Acme Cost of Investment $ 700,000 Percentage Acquired 40% 1st Year PHC Income $ 185,000 Projected Income Growth 10% PHC Dividends $ 30,000 PHC Patent Undervaluation $ 375,000 Net Income of PHC Acme's Share of PHC Income Amortization Expense Acme's Equity in PHC Earnings (2) Acme's Equity in PHC 2018 2019 2020 185,000 $203,500 $223,850 74,000 $ 81,400 $ 89,540 (15,000) $ (15,000) $ (15,000) 59,000 $ 66,400 $ 74,540 2021 $ 246,235 $ $ 98,494 $ $ (15,000) $ $ 83,494 $ 2022 270,859 108,343 (15,000) 93,343 (2) Acme's Investment in PHC 2018 2019 2020 2021 2022 700,000 $747,000 $801,400 $ 863,940 $ 935,434 59,000 $ 66,400 $ 74,540 $ 83,494 $ 93,343 (12,000) $ (12,000) $ (12,000) $ (12,000) $ (12,000) 747,000 $801,400 $863,940 $935,434 $ 1,016,777 Beginning Balance Equity Earnings Dividends Ending Balance (2) Excess Payment Acme Cost of Investment $ 700,000 Acme Share of Patent $ 150,000 Useful Life (Years) 10 Amortization Per Year $ 15,000 Return on Beginnng Investment 8.43% 8.89% 9.30% 9.66% 9.98% (3) Average Return on Beg. Investment 9.25% (3) Max Acme Can Pay to Earn >=10% (1) Preliminary Information Acme Co Investor PHC Co. Investee Acme Cost of Investment $ 700,000 Percentage Acquired 40% 1st Year PHC Income $ 185,000 Projected Income Growth 10% PHC Dividends $ 30,000 PHC Patent Undervaluation $ 375,000 Net Income of PHC Acme's Share of PHC Income Amortization Expense Acme's Equity in PHC Earnings (2) Acme's Equity in PHC 2018 2019 2020 185,000 $203,500 $223,850 74,000 $ 81,400 $ 89,540 (15,000) $ (15,000) $ (15,000) 59,000 $ 66,400 $ 74,540 2021 $ 246,235 $ $ 98,494 $ $ (15,000) $ $ 83,494 $ 2022 270,859 108,343 (15,000) 93,343 (2) Acme's Investment in PHC 2018 2019 2020 2021 2022 700,000 $747,000 $801,400 $ 863,940 $ 935,434 59,000 $ 66,400 $ 74,540 $ 83,494 $ 93,343 (12,000) $ (12,000) $ (12,000) $ (12,000) $ (12,000) 747,000 $801,400 $863,940 $935,434 $ 1,016,777 Beginning Balance Equity Earnings Dividends Ending Balance (2) Excess Payment Acme Cost of Investment $ 700,000 Acme Share of Patent $ 150,000 Useful Life (Years) 10 Amortization Per Year $ 15,000 Return on Beginnng Investment 8.43% 8.89% 9.30% 9.66% 9.98% (3) Average Return on Beg. Investment 9.25% (3) Max Acme Can Pay to Earn >=10%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started