1. UNFLEDGED Co. is contemplating on acquiring IMMATURE, Inc.

The following information

was gathered through a diligence audit:

 The actual earnings of IMMATURE, Inc. for the past 5 years are shown below:
Year Earnings
20x1 2,400,000
20x2 2,600,000
20x3 2,700,000
20x4 2,500,000
20x5 3,600,000
Total 13,800,000

 Earnings in 20x5 included an expropriation gain of ₱800,000.

 The fair value of IMMATURE’s net assets as of the end of 20x5 is ₱20,000,000.
 The industry average rate of return is 12%.
 Probable duration of “excess earnings” is 5 years.

Requirements:
a. How much is the estimated goodwill under the multiples of average excess earnings method?
b. How much is the estimated goodwill under the capitalization of average excess earnings method?
Use a capitalization rate of 25%.
c. How much is the estimated goodwill under the capitalization of average earnings method? Use a
capitalization rate of 12.5%.
d. How much is the estimated goodwill under the present value of average excess earnings method?
Use a discount rate of 10%.