P. Company is considering the acquisition of S. Company. To assess the amount it might be willing to pay (offering price), P. Company makes the following computations and assumptions.

A. S. Company has identifiable assets with a total fair value of $9,000,000 and liabilities of $5,600,000. 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 35% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by S. Company.

B. S. Companys pretax incomes for the years 2018 through 2020 were $700,000, $935,000, and $550,000, respectively. P. Company 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) 580,000

Depreciation on Equipment (each year) 30,000

Extraordinary Loss (year 2020) 200,000

Salary Expense (each year) 300000

Rent expenses (each year) 25000

C. The normal rate of return on net assets for the industry is 15%.

D. Assume that P. Company feels that it must earn a 20% return on its investment, and that goodwill is determined by capitalizing excess earnings. Based on these assumptions, answer question (1-5):

4. The offering price =

Group of answer choices

$5100000

$4041665

$410000

$4100000