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Geroge Tanner died October 2, 2014, survived by his son Thomas and his daughter Gigi and her two children. George was the sole stockholder of Tanner Inc., a C corporation. Gigi served as president of Tanner from its inception until early January 2015. However, she never has an employment agreement or a noncompete agreement with Tanner. George was not involved with the business; he simply provided the funding. Gigi executed all of Tanners contracts with its customers and was very involved with the business. George's will left half of the Tanner stock to Gigi and the other half to Thomas. In late December 2014, Gigi and Thomas had major disagreements, and soon thereafter Gigi formed a C corporation (GTS, Inc.) to compete with Tanner. Because of the personal relationships Gigi had with Tanners customers, almost all of them broke their contracts with Tanner and began doing business with GTS. Preparation of George;s estate tax return is underway, and one of the the estate's major assets is the Tanner stock. A questions has arisen whether the valuation of the Tanner stock should take into account the value of Gigi's persona goodwill due tot he absence of an employment agreement or a noncompete agreement. If so, the value of her personal goodwill would adversely affect the value otherwise determined for the stock. Your supervisor requested that you research the issue and present your results in a memo so she can discuss the valuation issue with the person who is preparing the appraisal of the Tanner stock.
The European Commission has given exemptions in all of the following areas except: a. exclusive purchasing agreements. b. patent license agreements. c. motor vehicle distribution agreements. d. merger agreements.
How does a leveraged buyout work? What does the debt structure of the firm normally look like after a leveraged buyout? What might be done to reduce the debt?
Kennedy Air Services is now in the final year of a project. The equipment originally cost $34 million, of which 80% has been depreciated. Kennedy can sell the used equipment today for $8.5 million, and its tax rate is 35%. What is the equipment's aft..
A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and monthly payments. What portion of the first month’s payment would be applied to amortization of the principal? What would be the principal balance on the loan a..
Assume that the real risk-free rate is 4 percent and the maturity risk premium is zero. If the nominal rate of interest on one-year bonds is 11 percent and on comparable-risk two-year bonds it is 12 percent, What is the one-year interest rate that is..
Jeffrey Yaffe, CFO of Koffee Enterprises, is evaluating a 10-year, 5.10 percent loan with gross proceeds of $5,930,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 1.20 percent of gross proceeds and wi..
What types of decisions, other than make-or-buy, discontinuing a business segment, or using a constrained resource, can be analyzed using relevant costs?
Rooter's cleaning services provided data concerning the costs incurred to clean hotel rooms for which hotel customers pay $150 per night. Data for the past 7 months are as follows: Jan, Feb, March, April, May, June, July: 250, 160, 200, 150, 285, 170..
Your firm has sales of $628,000 and cost of goods sold of $452,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the inventory turnover rate?
A company is estimating its optimal capital structure that consists of 20% debt 880%equity, based on market values (debt to equity D/S ratio is 0.25). The risk free rate is 5% and the marker risk premium is 6%. Currently the company's cost of equity...
The market price of ZYX stock has been volatile and you expect that volatility to continue for a few weeks based on recent news. Due to this belief you decide to purchase calls and puts to manage your exposure. What will be your total profit or loss ..
Suppose bond A has 20 years left to maturity, an 8% coupon rate, pays interest semi-annually, and has a 6% yield to maturity and bond B has 25 years left to maturity, a 5% coupon rate, pays interest semi-annually, and has a 7% yield to maturity. What..
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