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2 May, 09:48

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 $1,280,000 that is currently appraised at $1,480,000. The equipment originally cost $760,000 and is currently valued at $507,000. The inventory is valued on the balance sheet at $450,000 but has a market value of only one-half of that amount. The owner expects to collect 97 percent of the $245,200 in accounts receivable. The firm has $10,900 in cash and owes a total of $1,480,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

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  1. 2 May, 11:06
    0
    The market value of this firm is $980,744

    Explanation:

    The computation of the market value is shown below:

    = Current value of building + current value of building + market value of inventory + accounts receivable + cash balance - owing balance

    = $1,480,000 + $507,000 + $225,000 ($450,000 * 50%) + $237,844 ($245,200 * 98%) + $10,900 - $1,480,000

    = $980,744

    We take the market value instead cost value, as question has asked for the market value of the firm
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