Question

The Piper Co purchased a new machine 4 years ago at $15 million. The machine can be sold for $5 million today. The firm's current balance sheet shows a net fixed assets of $3 million, current liabilities of $2 million, and a net working capital of $750,000. If all the current assets were liquidated today, the company would receive $2.15 million cash. Calculate the book value of the firms assets.

Answer 1

Answer:

$5,750,000

Explanation:

Given that,

Net working capital = $750,000

Current Liabilities = $2,000,000

Book value of the net fixed assets = $3,000,000

Net working capital = Current assets - Current Liabilities

Book value of the current assets:

= Net working capital + Current Liabilities

= $750,000 + $2,000,000

= $2,750,000

Book value of the firm's assets:

= Book value of the current assets + Book value of the net fixed assets

= $2,750,000 + $3,000,000

= $5,750,000