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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 64P: Albion Inc. provided the following information for its most recent year of operations. The tax rate...
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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.

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