Present operating income and fair value of its net assets

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Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of $60,200 and net assets with a fair value of $203,000. Takeover Co. pays $287,000 for Target Co.'s net assets and business activities.

1. Calculate the ROI for Target Co. based on its present operating income and the fair value of its net assets. (Round your percentage answer to 2 decimal places.)

2. Calculate the ROI that Takeover Co. will earn if the operating income of the acquired net assets continues to be $60,200. (Round your percentage answer to 2 decimal places.)

Reference no: EM131263845

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