Lee Nicholas has been the owner and has operated World.com Adverstising since its begining 10 yeaars…

ago. The company has prospered. Recently, Nicholas mentioned that he would sell the business for the right price.

1. Assume that the most you would pay for the business is 20 times the monthly net income you could expect to ear from it. Compute this possible price.

2. Nicholas states that the least he will take for the business is an amount equal to the business’s stockholders’ equity balance on January 31. Compute this amount.

3. Under these conditions, how much should you offer Nicholas? Give your reason.