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

A$.$

Blossom, Inc. has identifiable assets with a total fair value of $$6,032,000$ and liabilities of $$3,721,000.$ 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 Blossom, Inc.

B$.$

Blossom, Inc.$$s pretax incomes for the years $2020$ through $2022$ were $$473,200,$ $$570,800,$ and $$373,700,$ respectively. Wildhorse 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$)380,400$

Depreciation on Equipment $($each year$)31,900$

Extraordinary Loss $($year $2022)134,500$

Salary Expense $($each year$)174,600$

C$.$ Assume that Wildhorse 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 Blossom, 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 places e$.$g$.58,971.)$

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

Goodwill $

$172726-$ wrong answer

Incorrect answer

Offering price $

$2483726-$wrong answer

Incorrect answer