Estimated fair value of the contingent consideration

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Reference no: EM131264138

In a business combination, Acquirer Company agrees to pay the shareholders of Acquiree Company $0.25 in cash for every dollar in total income from continuing operations of the combined entity over $200,000 in the first three years following acquisition. Acquirer Company projects that there is a 20% (35%, 30%, 15%) probability that the total income from continuing operations for the first three years is $150,000 ($230,000, $270,000, $300,000 respectively). Acquirer uses a discount rate of 7%. What is the estimated fair value of the contingent consideration?

Reference no: EM131264138

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