Navin is thinking about purchasing a small sports apparel and accessories store. The following facts have been gathered:

1. The liquidation value of all assets minus liabilities is RM150,000;
2. The earning power desired is 10%;
3. The buyer needs a yearly salary of RM36,000;
4. The average annual earnings before subtracting the entrepreneurs salary and earning power is RM40,000;
5. Any extra earning power is estimated to be of value for five years.

Evaluate the following:

a. How much should Navin be willing to pay for the business?

b. In conducting an effective due diligence, what should Navin investigate in addition to the financial condition of the small business?