Company A, who manufactures chocolate cookies, is considering the acquisition of Company Z, who manufactures gingerbread cookies. To assess the amount it might be willing to pay, Company A makes the following computations and assumptions. Company Z has identifiable assets with a total fair value of $7,000,000 and liabilities of $3,200,000. The assets include manufacturing equipment with a fair value approximating book value, buildings with a fair value 25% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Company Z. Company Z's pretax incomes for the years 2017 through 2019 were $875.000, $740,000, and $765,000, respectively. Company A believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments for the following items included in pretax earnings: Depreciation on Buildings (each year) 280,000 Depreciation on Equipment (each year) 50,000 Gain on sale of Equipment (Jan. 2017) 130,000 Interest Expense (each year) 25,000 The normal rate of return on net assets for the industry is 15%. Assume that Company A typically feels that it must earn a 20% return on major investments and that goodwill is determined by capitalizing excess earnings over five years. Required Prepare a memo for the CEO of Company A that: a) Provides your recommended offering price for Company Z and explains how you arrived at it a) Performs a sensitivity analysis that varies the discount rate and number of periods used to capitalize goodwill to help the CEO evaluate the risk of any counter offers made. b) Contains a figure or figures with calculations supporting your responses for a & b (can be screenshots from your excel file)