7 Recently the owner of Marthas Wares encountered severe leg

7 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 $1,270,000 that is currently appraised at $1,470,000. The equipment originally cost $750,000 and is currently valued at $497,000. The inventory is valued on the balance sheet at $440,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes a total of $1,470,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? 6 O $71700o o $1,863,396 $1,183196 o $1,423,396 O $963196

Solution

1 963196 1470000+497000+220000+235396+10800-1470000 963196 2 $60 •Cash flow to creditors = interest paid - net new borrowing •Interest paid = $28 •Net new borrowing = end of yr long term debt- beginning of yr long term debt =262-294 =$-32 •Cash flow to creditors = $28 - ($32) Cash flow to creditors = $60 3 39.18 Days Accounts Receivabels / Net credit sales 1080 / 10060*365              39.18 4 1.74 Total Assets / Total Stockholder\'s equity 6420 / 3690                 1.74