LO.3 At her death, Inez owned 60% of the stock in Taupe Corporation, with the balance held by family members. In the past five years, Taupe has earned average net profits of $1.5 million, and on the date of Inez’s death, the book value of its stock is

$3.9 million. An appropriate rate of return for the type of business Taupe is in is 8%.

a. Assuming that goodwill exists, what is the value of the Taupe stock?

b. What factors could be present to reduce the value of such goodwill?