Brown Company is considering the purchase of Orange Company. Orange Company has supplied the following information: Book Value of Identifiable Assets: 882000 Estimated Market Value of Identifiable Assets: 759000 Total Liabilities: 208000 Total cumulative net cash earnings for the past eight years of 583000 includes extraordinary cash gains of 78000 and nonrecurring cash losses of 74000. Brown Company expects a return on investment of 15%. Brown uses cash earnings to estimate its offering price and it estimates valuation of Orange to be equal to the present value of cash-based earnings, discounted over 8 years. 1. The offering price that Brown is willing to pay is 324769.9 0324768.3375 and goodwill associated with this amount is 226230.10 X 2. If final purchase price is 888000, the amount of goodwill actually recorded is 329000 x
