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 $1,190,000 that is currently appraised at $1,390,000. The equipment originally cost $670,000 and is currently valued at $417,000. The inventory is valued on the balance sheet at $360,000 but has a market value of only one-half of that amount. The owner expects to collect 97 percent of the $200,200 in accounts receivable. The firm has $11,200 in cash and owes a total of $1,390,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm

Answer 1

Answer:

$802,394

Explanation:

   Calculation of market value of firm

Particulars                        Current value

Building                               $1,390,000

Equipment                          $417,000

Inventory                             $180,000 ($360,000 * 1/2)

Account receivable            $194,194  ($200,200 * 0.97)

Cash                                    $11,200

Money owned                    ($1,390,000)

Total market value            $802,394

So, the market value of this firm is $802,394.