You have been asked to value Pacific Corporation, Inc., using an excess earnings method, given the following information:
• Working capital balance = $2,000,000
• Fair value of fixed assets = $5,500,000
• Book value of fixed assets = $4,000,000
• Normalized earnings of firm = $1,000,000
• Required return on working capital = 5.0 percent
• Required return on fixed assets = 8.0 percent
• Required return on intangible assets = 15.0 percent
• Weighted average cost of capital = 10.0 percent
• Long-term growth rate of residual income = 5.0 percent
Based on this information:
a. What is the value of Pacific’s intangible assets?
b. What is the market value of invested capital?