Cermco produces and sells specialty customer relationship management (CRM) solutions to small and medium-size businesses in the United States and Canada. The company is more than 20 years old and has a steady, loyal customer base.

A major reason for Cermco's success lies in the ability of its product to easily integrate with various accounting and ERP systems. As a result, even when clients upgrade their entire accounting systems to expensive ERP solutions, they continue to use Cermco's CRM because of its superior features.

Annual revenues for Cermco's three most recent years are about $11 million (20X3), $7 million (20X4), and $3 million (20X5), respectively. Overall interest expenses and operating margins have remained a relatively constant percentage of revenues.

Cermco attributes the decline in revenues to declines in market share as a result of natural client turnover and the entrance of many other small competing software companies into the market. Nevertheless, Cermco's CRM product continues to enjoy the highest industry ratings and a loyal customer base.

Cermco's balance sheets for the most recent three years follow:

CERMCO Balance Sheet December 3120X520X420X3AssetsCurrent assetsCash and cash equivalents$390$1,386$2,603Short-term investmentsNet receivables7206641,225InventoryOther current assets412469892Total current assets$1,522$2,519$4,720Long-term investments1,215Property, plant, and equipment76258454Goodwill5451,7572,194Intangible assets9991,8443,644Accumulated amortizationOther assetsDeferred long-term asset chargesTotal assets$4,357$6,378$11,012LiabilitiesCurrent liabilitiesAccounts payable$469$1,174$1,436Short/Current long-term debt600Other current liabilities1,2271,3581,496Total current liabilities$1,696$2,532$3,532Long-term debtOther liabilitiesDeferred long-term liability chargesMinority InterestNegative goodwillTotal liabilities1,6962,5323,532Stockholders' equityMisc. stock option warrantsRedeemable preferred stockPreferred stock3,0143,2112,333Common stock161613Retained earnings-25,513-23,814-19,165Treasury stockCapital surplus25,16825,56425,862Other stockholders' equity-24-1,131-1,563Total stockholders' equity$2,661$3,846$7,480Produce a valuation estimate for Cermco for December 31, 20X5. Use whatever valuation method you think best but justify your choice. Note that you can estimate the annual income from year-to-year changes in the balance sheet.