Step 1

(a)

Reasonable offering price for C Company is calculated as follows:

Step 1: Normal rate of return on net assets on similar firm is 15%.

Step 2: Normal earning using the rate of return is calculated as follows:

Step 3: Expected future earnings of the target company is calculated as follows:

Step 4: Excess earnings is calculated as follows:

Step 5: Estimated goodwill from excess earnings is computed as follows:

Present value of excess earnings at 25%:

Step 6: Possible offering price is calculated as follows:

Thus, the reasonable offering price for C Company is 65, 94,668.

Step 6

(b)

Implied offering price and estimated goodwill is calculated as follows:

Thus, the reasonable offering price for C Company is 64, 25,279.

1-3

Step 1

(A)

Normal earning using the rate of...