Question

Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,160,000 that is currently appraised at $1,360,000. The equipment originally cost $640,000 and is currently valued at $387000. The inventory is valued on the balance sheet at $330,000 but has a market value of only one-half of that amount. The owner expects to collect 97 percent of the $185,200 In accounts receivable. The firm has $11,500 in cash and owes a total of $1,360,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? O $552,000 O $1,423.344 O $1,093,344 O $743,144 O $908144

Answer 1

Market Value of firm = Market value of assets - Market value of libilities relating to firm only

Particulars Cost Market Value Assets Building Equipment $ 11,60,000.00 $ 13,60,000.00 $ 6,40,000.00$ 3,87,000.00 $ 3,30,000.00$ 1,65,000.00 Accounts receivables $ 1,85,200.00 $ 1,79,644.00 $ 11,500.00$ 11,500.00 $ 21,03,144.00 Cash Total Assets Debt Market Value (13,60,000.00)(13,60,000.00) $ 7,43,144.00

Thus Option "d" is correct

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