Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Exercise 6-20 (Algo) Goodwill-effect on ROI and operating income LO 6-9 Check my work Goodwill arises when one firm acquires the net assets of
Exercise 6-20 (Algo) Goodwill-effect on ROI and operating income LO 6-9 Check my work Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Company had operating income of $56,100 and net assets with a fair value of $153,000. Takeover Company pays $316,000 for Target Company's net assets and business activities. Required: a. How much goodwill will result from this transaction? b. Calculate the ROI for Target Company based on its present operating income and the fair value of its net assets. c. Calculate the ROI that Takeover Company will earn if the operating income of the acquired net assets continues to be $56,100. d. Takeover Company is willing to pay $163,000 more than fair value for the net assets acquired from Target Company as it represents goodwill and the expected superior earnings in future years. Complete this question by entering your answers in the tabs below. Req A to C Req D a. How much goodwill will result from this transaction? b. Calculate the ROI for Target Company based on its present operating income and the fair value of its net assets. Note: Round your percentage answer to 2 decimal places.. c. Calculate the ROI that Takeover Company will earn if the operating income of the acquired net assets continues to be $56,100. Note: Round your percentage answer to 2 decimal places.. Show I
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