rks Window Helg CengageNoW I Online teaching and learning resource from Cengape
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rks Window Helg CengageNoW I Online teaching and learning resource from Cengape Learning nt: Chapter 10 Assignment Assignment Score: 09.44% SaveExi Submit Assignment for Grading s 2Exercise 10-14 Check My Work O Exercise 10-14 Negotiating the Sale of a Business Corporation. The company has assets of $1,800,000, labities of $1,600,000, and stocknelders return to expect is 12 percent; however, they ffer t on oner believes thet equity of $200,000. Both parties agree that the proper rate of business will generate at least $200,000 per year of cash fows for 20 years, Besh thinks that $160,000 in cash fows per year is more reasonable and that enly 10 yean n the future should be considered. Note; Table 2 on Present valve may be used where ropriate to solve this problem. Determine the range for negotiation by computing the present value of Knight's offer to sell and of Bosh's ofer to buy Knight's offer to sel Bosh's offer to buy Check My Work Question a Cengage Learning Cenpge Technical 8 9 4 0Explanation / Answer
CALCULATION OF THE PRESENT VALUE OF THE OFFER MADE BY KNIGHT YEARS Per year Cashh flow PVF @ 12% Present Value 1 $ 2,00,000 0.8929 $ 1,78,571 2 $ 2,00,000 0.7972 $ 1,59,439 3 $ 2,00,000 0.7118 $ 1,42,356 4 $ 2,00,000 0.6355 $ 1,27,104 5 $ 2,00,000 0.5674 $ 1,13,485 6 $ 2,00,000 0.5066 $ 1,01,326 7 $ 2,00,000 0.4523 $ 90,470 8 $ 2,00,000 0.4039 $ 80,777 9 $ 2,00,000 0.3606 $ 72,122 10 $ 2,00,000 0.3220 $ 64,395 11 $ 2,00,000 0.2875 $ 57,495 12 $ 2,00,000 0.2567 $ 51,335 13 $ 2,00,000 0.2292 $ 45,835 14 $ 2,00,000 0.2046 $ 40,924 15 $ 2,00,000 0.1827 $ 36,539 16 $ 2,00,000 0.1631 $ 32,624 17 $ 2,00,000 0.1456 $ 29,129 18 $ 2,00,000 0.1300 $ 26,008 19 $ 2,00,000 0.1161 $ 23,221 20 $ 2,00,000 0.1037 $ 20,733 Total $ 14,93,889 CALCULATION OF THE PRESENT VALUE OF THE OFFER MADE BY BOSH'S YEARS Per year Cashh flow PVF @ 12% Present Value 1 $ 2,00,000 0.8929 $ 1,78,571 2 $ 2,00,000 0.7972 $ 1,59,439 3 $ 2,00,000 0.7118 $ 1,42,356 4 $ 2,00,000 0.6355 $ 1,27,104 5 $ 2,00,000 0.5674 $ 1,13,485 6 $ 2,00,000 0.5066 $ 1,01,326 7 $ 2,00,000 0.4523 $ 90,470 8 $ 2,00,000 0.4039 $ 80,777 9 $ 2,00,000 0.3606 $ 72,122 10 $ 2,00,000 0.3220 $ 64,395 PRESENT VALUE OF THE OFFER. $ 11,30,045 KNIGHT'S OFFER TO SALE = $ 14,93,889 BOSH'S OFFER TO BUY = $ 11,30,045
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