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 Cermcos 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 Cermcos CRM because of its superior features. Discussion Questions Cases 620 Part V Other Forensic Accounting Services Annual revenues for Cermcos 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, Cermcos CRM product continues to enjoy the highest industry ratings and a loyal customer base. Cermcos balance sheets for the most recent three years follow: CERMCO BALANCE SHEET DECEMBER 31 Thousands 20X5 20X4 20X3 Assets Current assets Cash and cash equivalents $ 390 $1,386 $ 2,603 Short-term investments Net receivables 720 664 1,225 Inventory Other current assets 412 469 892 Total current assets $1,522 $2,519 $ 4,720 Long-term investments 1,215 Property, plant, and equipment 76 258 454 Goodwill 545 1,757 2,194 Intangible assets 999 1,844 3,644 Accumulated amortization Other assets Deferred long-term asset charges Total assets $4,357 $6,378 $11,012 Liabilities Current liabilities Accounts payable $ 469 $1,174 $ 1,436 Short/Current long-term debt 600 Other current liabilities 1,227 1,358 1,496 Total current liabilities $1,696 $2,532 $ 3,532 Long-term debt Other liabilities Deferred long-term liability charges Minority interest Negative goodwill Total liabilities $1,696 $2,532 $ 3,532 Chapter 19 Business Valuation 621 Produce 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.