Question

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6 million. The machinery can be sold to the Romulans today for $5.1 million. Klingon’s current balance sheet shows net fixed assets of $3.4 million, current liabilities of $895,000, and net working capital of $235,000. If the current assets and current liabilities were liquidated today, the company would receive a total of $1.15 million cash. a. What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b. What is the sum of the market value of NWC and the market value of fixed assets? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Answer 1

a. What is the book value of Klingon’s total assets today?

total assets = net fixed assets + current assets

• net fixed assets = $3,400,000
• current assets = net working capital + current liabilities = $235,000 + $895,000 = $1,130,000

total assets = $3,400,000 + $1,130,000 = $4,530,000

b. What is the sum of the market value of NWC and the market value of fixed assets?

• market value of NWC = $1,150,000
• market value of fixed assets = $5,100,000

FMV of NWC + fixed assets = $1,150,000 + $5,100,000 = $6,250,000