Jake owns The Corner Market which he is trying to sell so that he can retire and

Question

Jake owns The Corner Market which he is trying to sell so that he can retire and travel. The Corner Market owns the building in which it is located. This building was built at a cost of $1,200,000 and is currently appraised at $1,470,000. The counters and fixtures originally cost $653,000 and are currently valued at $419,000. The inventory is valued on the balance sheet at $357,000 and has a retail market value equal to 1.2 times its cost. Jake expects the store to collect 99 percent of the $190,500 in accounts receivable. The firm has $9,800 in cash and has total debt of $1,430,000. What is the market value of the firm's equity?

Explanation / Answer

Calculation of market value of firm's equity Particulars Market Value Building $1,470,000.00 Counters and fixtures $419,000.00 Inventory [$357000 * 1.2] $428,400.00 Accounts receivables [$190500 *99%] $188,595.00 Cash $9,800.00 Total Market value of assets $2,515,795.00 Less : Total Debt $1,430,000.00 Market value of the firm's equity $1,085,795.00

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