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US based Wilde Inc. is considering the acquisition of Styles Co. in the United Kingdom to meet international growth targets. The net assets of Styles

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US based Wilde Inc. is considering the acquisition of Styles Co. in the United Kingdom to meet international growth targets. The net assets of Styles are estimated to be worth $5,200,000 at fair value and excess earnings, which will be capitalized at 20% over 5 years to calculate goodwill, are projected to be $104,000. Styles is currently asking for $5,500,000 as a purchase price. This is a friendly acquisition and Wilde is fairly confident in the value of Styles's net assets. Wilde is less confident in their application of the excess earnings approach to value any goodwill that could be acquired in the transaction. They believe that the discount rate could be anywhere from 15-25\% and that the period of excess earnings could range from 37 years. Please (1) prepare a sensitivity analysis based on the ranges provided for the two critical assumptions and (2) comment on whether the purchase price seems fair based on the current assumptions. Your response must be supported by numbers/calculations. US based Wilde Inc. is considering the acquisition of Styles Co. in the United Kingdom to meet international growth targets. The net assets of Styles are estimated to be worth $5,200,000 at fair value and excess earnings, which will be capitalized at 20% over 5 years to calculate goodwill, are projected to be $104,000. Styles is currently asking for $5,500,000 as a purchase price. This is a friendly acquisition and Wilde is fairly confident in the value of Styles's net assets. Wilde is less confident in their application of the excess earnings approach to value any goodwill that could be acquired in the transaction. They believe that the discount rate could be anywhere from 15-25\% and that the period of excess earnings could range from 37 years. Please (1) prepare a sensitivity analysis based on the ranges provided for the two critical assumptions and (2) comment on whether the purchase price seems fair based on the current assumptions. Your response must be supported by numbers/calculations

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