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 $387,000. 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?

Answer 1

Market Value = $743,144

Step-by-step explanation:

Market Value of firm = The Market value of assets - Market value of liabilities

Particulars Cost Market value

Assets

Building $1,160,000 $1,360,000

Equipment $640,000 $387,000

Inventory $330,000 $165,000

Cash $185,000 $179,644

Account receivables $11,500 $11,500

Total Assets $2,103,144

Debt ($1,360,000) ($1,360,000)

Market Value $743,144