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 $1,230,000 that is currently appraised at $1,430,000. The equipment originally cost $710,000 and is currently valued at $457,000. The inventory is valued on the balance sheet at $400,000 but has a market value of only one-half of that amount. The owner expects to collect 99 percent of the $220,200 in accounts receivable. The firm has $10,400 in cash and owes a total of $1,430,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

Answer 1

The market value of this firm is $885,398

Step-by-step explanation:

The computation of the market value of this firm is shown below:

= Market value of assets - market value of liabilities

where,

Market value of assets = Building + equipment + inventory + accounts receivable + cash

= $1,430,000 + $457,000 + $200,000 + $217,998 ($220,200 × 0.99) + $10,400

= $2,315,398

And, the total owes is $1,430,000

Now put these values to the above formula

So, the value would equal to

= $2,315,398 - $1,430,000

= $885,398