Oriole Company is considering the acquisition of Sheffield, Inc. To assess the amount it might be willing to pay, Oriole makes the following computations and assumptions.

A

$.$

$$Sheffield$,$ Inc. has identifiable assets with a total fair value of $

$6$

$,$

$008$

$,$

$000$

$$and liabilities of $

$3$

$,$

$723$

$,$

$000$

$.$

$$The assets include office 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 Sheffield, Inc.

B

$.$

$$Sheffield$,$ Inc.

$\text{'}$

s pretax incomes for the years

$2020$

$$through

$2022$

$$were $

$470$

$,$

$200$

$$Oriole believes that an average of these earnings represents a fair estimate of an:

$0$

$,$

$$and $

$374$

$,$

$200$

$,$

$$respectively$.$ However, it may need to consider adjustments for the following items included in pretax earnings:

$\backslash$

table

$[[$

Depreciation on Buildings

$($

each year

$)$

$,$

$381$

$,$

$900]$

$,$

$[$

Depreciation on Equipment

$($

each year

$)$

$,$

$31$

$,$

$700]$

$,$

$[$

Extraordinary Loss

$($

year

$2022)$

$,$

$133$

$,$

$500]$

$,$

$[$

Salary Expense

$($

each year

$)$

$,$

$174$

$,$

$200]]$

C

$.$

$$The normal rate of return on net assets for the industry is

$15$

$\%$

$.$

Assume that Oriole feels that it must earn a

$15$

$\%$

$$return on its investment, but that average excess earnings are to be capitalized for five years only. Based on these assumptions, calculate a reasonable offering price for Sheffield, Inc. Indicate how much of the price consists of goodwill.

$($

Round present value factor calculations to

$5$

$$decimal places, e

$.$

g

$.$

$1\mathrm{.}25124$

$$and final answers to

$0$

$$decimal placeseg.

$58$

$,$

$971$

$.$

$)$

Goodwill$

Offering price$