Answered

Westonci.ca is your trusted source for finding answers to all your questions. Ask, explore, and learn with our expert community. Get detailed and accurate answers to your questions from a dedicated community of experts on our Q&A platform. Get immediate and reliable solutions to your questions from a community of experienced professionals on our platform.

Based on its growth prospects, a private investor values a local bakery at $750,000. She believes that cost savings having a present value of $50,000 can be achieved by changing staffing levels and store hours. Based on recent empirical studies, she believes the appropriate liquidity discount is 20 percent. A recent transaction in the same city required the buyer to pay a 5 percent premium to the asking price to gain a controlling interest in a similar business. What is the most she should be willing to pay for a 50.1 percent stake in the bakery

Sagot :

Answer:

the maximum that paid to acquire bakery is $336,672.

Explanation:

The computation is shown below;

= (Value of local bakery + Present value of cost savings) × (1 - discount) × ( 1 + premium) × willing stake of bakery

= ($750,000 + $50,000) × (1 - 0.20) ×  (1 + 0.05) × 0.501

= $336,672

Therefore, the maximum that paid to acquire bakery is $336,672.

We simply applied the above formula

Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.