Question

what is the book value and market value if it was liquidated to day i would receive 7.65 million in cash after paying 9.5 million in current liabilities fixed assets are 22 million and capital is 8.5 million and the current assets could be sold for 35 million today

Answer 1

Answer:

The market value of capital would be 11.15 million

Explanation:

Book value of an asset is the value at which the asset and liabilities are currently reflecting in the balance sheet of a firm. The market value is the value at which these assets and liabilities are currently valued as per present market rates. For example : Land value normally appreciates over time and eventhough it is purchased at say $100.000/-, its present value market valuation rate could be $300,000/-. This is the difference between a book value and market value.

In this case, on sale of current assets, a profit of 13 million would be made. Out of this, 9.5 million current liability is paid. Remaining is 3.5 million. Cash received after paying current liabilities is 7.65 million. Hence adding 3.5million+7.65million = 11.15million is the market value of capital which was originally 8.5 million.

                       Book Value             Market Value             Difference

Capital                8.5                            11.15

Current Liability   9.5                           9.5

Current Asset        22                           35                         13

Paid for CL                                                                          9.5

Remaining value                                                                 3.5

Cash Recd                                                                           7.65

Mkt value of capital                                                             11.15            

(3.5+7.65)