Purchase Solution

Goodwill acquiring Trim Company

Not what you're looking for?

Ask Custom Question

Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $70,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyches' purchase of Trim?

Purchase this Solution
Solution Summary

The solution finds the net present value of the excess earnings, over 5 years.

Solution Preview

In this case, we simply have to find the net present value of the excess earnings, over 5 years. Since the ...

Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Introduction to Finance

This quiz test introductory finance topics.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

View More Free Quizzes
Related BrainMass Solutions

  • accounting finance present value of annuity

    wants to acquire Trim Company.

  • Consolidated financial statements

    Moreover, adjustments have to be done if the acquiring company has done business with the acquired company.

  • Accounting/Business Analysis/Financial Reporting

    Moreover, adjustments have to be done if the acquiring company has done business with the acquired company.

  • definitions of financial terms

    An acquiring company and a target company Answer: There are a variety of reasons that an acquiring company may wish to purchase another company.

  • Worksheet To Consolidate A Balance Sheet with Goodwill

    Using an Excel 97-2003 spreadsheet, this solution illustrates how to consolidate the balances of an acquiring corporation and its newly-purchased subsidiary immediately after the acquisition if Goodwill is involved.

  • Accounting for Goodwill

    The solution explains the accounting for goodwill under Economic unit concept, Proportionate consolidation concept and Parent company concept

  • Deriving a Balance Sheet Analysis

    In regards to goodwill and intangibles, Companies B & D are reporting high, with Company B having higher retained earnings. The goodwill happens when one company pays more than the fair market value when acquiring another company.

  • Mergers & Acquistions - Goodwill

    Goodwill also arises because of past record of excellent customer service. The acquiring company also gets the reputation among the customers of the acquired company. This can increase the cash flow of the combined firm.

  • Acquisition and Shareholder Value

    This would create goodwill on the balance sheet. The acquiring company could then join resources and provide a cost savings between the two companies. This solution explains how an acquisition creates shareholder value.

View More Related Solutions