This question gives you some data and asks you to compute the value of a firm using the excess earnings method. One of the given data points is “discount rate for intangible assets.” I have never heard that term before, and apparently, google hasn’t really either. Does anyone understand what on earth is happening in steps #3 and 4 in the solution to this question?
Residual earnings is being calculated - and since you have accounted for the “return” on WC and Fixed Capital - that residual income is applicable to the intangible assets. Based on the discount rate for the intangible assets + the “return” and growth rates -> arrive at the total intangible assets number. Firm value = Working Capital + Fixed Cap. + Intangible Assets.