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Buying An Existing Business

Buying An Existing Business. For Sale. Excess Earnings Method. (Continued). * Years of Profit Figure ranges from 1 to 7; for a normal risk business, it is 3 or 4. Step 4 : Compute extra earning power (EEP):. EEP = Projected Net Earnings - Total Opportunity Costs.

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Buying An Existing Business

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  1. Buying An Existing Business For Sale

  2. Excess Earnings Method (Continued) * Years of Profit Figure ranges from 1 to 7; for a normal risk business, it is 3 or 4. Step 4: Compute extra earning power (EEP): EEP = Projected Net Earnings - Total Opportunity Costs = $74,000 - 65,078 = $8,922 Step 5: Estimate the value of the intangibles ("goodwill"): Intangibles = Extra Earning Power x "Years of Profit" Figure* = 8,922 x 3 = $26,766

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