Ms Fortunate told you she is investigating an existing company as a possible purchase candidate. She then furnished you with the following information

Ms Fortunates annual salary for the previous year was $6

Last income statement net income $120,000

Projected increase in sales $80,000

projected increase in expenses $30,000

Tax rate 25%

Adjusted balance sheet value of business $150,000

Accepted rate of return for risk 20%

Question 1

You are requested by Ms Fortunate to value the company using the capitalised earnings approach, show all workings.

Question 2

Ms Fortunate then asked you to calculate the value of the company using the excess earnings approach. You are asked to include all working, so that Ms Fortunate can reproduce it in the future for other business opportunities.

Question 3

Ms Fortunate asked for a third opinion based on the discounted future earnings approach. The following projections and information was compiled:

Year	Pessimistic	Most Likely	Optimistic
XXX1	150,300	155,430	160,780
XXX2	155,600	165,900	171,500
XXX3	168,100	175,200	182,000
XXX4	172,900	182,500	192,500
XXX5	185,200	190,200	195,800

	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5	Yr 6
PVIF (20%)	0.833	0.694	0.579	0.483	0.402	0.335