1. You are considering selling 10% of your business, Fun Products, Inc., to an investor. Its income statement for its most recent year along with such data and market information for two companies it has identified as its closest comparable entities, whose shares are traded on the public markets, is outlined below:

Fun Products uses LIFO to value its inventories which resulted in a higher cost of goods sold than it would if it used FIFO in the amount of $75,000. Wow Corp and LOL Inc. use FIFO to value their inventories. All other accounting policies are similar among the companies.

What range of value would you estimate for 10% ownership interest in Fun Products using the Price Comparable (Price Multiples) method assuming earnings from operations is deemed the best measure of performance/value? Assume a control premium, minority discount and lack of marketability discount of 30%, 20% and 25%, respectively.

Wow Corp LOLI Fun Products, Inc $ 2,500,000 1,500,000 1,000,000 500,000 Sales Cost of Sales Gruss Profit Selling, General & Admin Expenses Impairment Expense (nonrecurring) Operating Earnings Income Tax Experise Net Income Market capitalization $ 3,600,000 $3,200,000 1,740,000 1,888,000 1,260,000 1,312,000 600,000 613,000 55,000 660,000 649,000 231,000 227,150 $ 429,000 $ 421,850 $ 3,630,000 $ 4,224,000 500,000 175,000 325,000 $ Wow Corp LOLI Fun Products, Inc $ 2,500,000 1,500,000 1,000,000 500,000 Sales Cost of Sales Gruss Profit Selling, General & Admin Expenses Impairment Expense (nonrecurring) Operating Earnings Income Tax Experise Net Income Market capitalization $ 3,600,000 $3,200,000 1,740,000 1,888,000 1,260,000 1,312,000 600,000 613,000 55,000 660,000 649,000 231,000 227,150 $ 429,000 $ 421,850 $ 3,630,000 $ 4,224,000 500,000 175,000 325,000 $