Question

The Corey Corporation has fixed assets with a book value of $700 and an appraised market value of about $1,000. Net working capital is $400 on the books, but approximately $600 if all the current accounts were liquidated. Corey has $500 in long-term debt, in book value as well as market value terms. What is the market value of Corey Corporation's equity?.

Answer 1

The market value of Corey Corporation's equity is $1,100.

Data and Calculations:

Fixed assets book value = $700

Appraised market value = $1,000

Net working capital book value = $400

Net working capital liquidated value = $600

Long-term debt book and market value = $500

Market value of Equity = $1,100 ($1,000 + $600 - $500)

The market value of the equity is based on the market value of fixed assets plus the liquidated value of the net working capital minus the market value of long-term debt.

Thus, the market value of Corey Corporation's equity is $1,100.

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