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In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 c. $6,045,500 d. Cannot be determined from the information provided.

In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 c. $6,045,500 d. Cannot be determined from the information provided.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 52E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...
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39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 $6,045,500 Cannot be determined from the information provided. d.
Transcribed Image Text:39. In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 $6,045,500 Cannot be determined from the information provided. d.
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