The owners of Kripps and Kapacz Packaging Company (KKPC) are considering selling their business to an industry rival. The two owners each own 10,000 shares of KKPC, and they would like an estimate of the proper value of the shares. Below are the income statements for KKPC for the past four years.2019201820172016Revenue$2,587,500$2,435,000$2,350,000$2,225,750Cost of goods sold1,772,4381,631,4501,551,0001,446,738Gross profit815,062803,550799,000779,012Operating expensesSalary to owners200,000200,000200,000200,000Rent100,000125,000125,000125,000Restructuring charge?75,000??Relocation expenses57,500???Gain on sale of building??(150,000)?Other operating expenses155,000150,000135,000129,500Total operating expenses512,500550,000310,000454,500Pre-tax income302,562253,550489,000324,512Income tax at 35%105,89788,743171,150113,579Net income$ 196,665$ 164,807$ 317,850$ 210,933KKPC pays the owners salaries of $100,000 per year each as general manager and chief operating officer. The comparable salaries for these positions at a similarly sized business would be $150,000 each.On January 1, 2019, the KKPC office moved to a space controlled by a company owned by the owners' wives which rented to them at a rate lower than market. Market rent for a similar space in 2019 was $125,000.KKPC is expected to grow its normalized net income at a constant rate of 3% for the foreseeable future. KKPC's capital structure is 60% equity and 40% debt, and its debt consists of a $250,000 bank loan. The after-tax cost of KKPC's debt is 6.5%, and its weighted average cost of capital is 12.5%. KKPC is subject to tax at a rate of 35%.Required:a) Calculate the normalized earnings for KKCC for 2016, 2017, 2018 and 2019. b) Calculate KKCC's value per common share using the capitalization of earnings approach. Do NOT weight the recent periods more heavily.

The owners of Kripps and Kapacz Packaging Company (KKPC) are considering selling their business to an industry rival. The two owners each own 10,000 shares of KKPC, and they would like an estimate of the proper value of the shares. Below are the income statements for KKPC for the past four years. 2019 2018 2017 2016 Revenue $2,587,500 $2,435,000 $2,350,000 $2,225,750 Cost of goods sold 1,772,438 1,631,450 1,551,000 1,446,738 Gross profit 815,062 803,550 799,000 779,012 Operating expenses Salary to owners 200,000 200,000 200,000 200,000 Rent 100,000 125,000 125,000 125,000 Restructuring charge 75,000 Relocation expenses 57,500 Gain on sale of building (150,000) Other operating expenses 155,000 150,000 135,000 129.500 Total operating expenses 512,500 550,000 310,000 454.500 Pre-tax income 302,562 253,550 489,000 324,512 Income tax at 35% 105,897 88,743 171,150 113,579 Net income $ 196,665 $ 164,807 $ 317,850 $ 210.933 KKPC pays the owners salaries of $100,000 per year each as general manager and chief operating officer. The comparable salaries for these positions at a similarly sized business would be $150,000 each. On January 1, 2019, the KKPC office moved to a space controlled by a company owned by the owners' wives which rented to them at a rate lower than market. Market rent for a similar space in 2019 was $125,000. KKPC is expected to grow its normalized net income at a constant rate of 3% for the foreseeable future. KKPC's capital structure is 60% equity and 40% debt, and its debt consists of a $250,000 bank loan. The after-tax cost of KKPC's debt is 6.5%, and its weighted average cost of capital is 12.5%. KKPC is subject to tax at a rate of 35%. Required: a) Calculate the normalized earnings for KKCC for 2016, 2017, 2018 and 2019. b) Calculate KKCC's value per common share using the capitalization of earnings approach. Do NOT weight the recent periods more heavily