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 $721,000 and are currently valued at $411,000. The inventory is valued on the balance sheet at $341,000 and has a retail market value equal to 1.2 times its cost. Jake expects the store to collect 92 percent of the $182,700 in accounts receivable. The firm has $9,400 in cash and has total debt of $1,420,000. What is the market value of the firm's equity?

$929,484

$1,453,184

$1,047,684

$820,200

$1112184

Answer 1

Market value of equity	Market value of total assets - Market value of total debt
Calculation of market value of total assets
Building	$1,470,000
Fixtures	$411,000
Inventory	$409,200	341000*1.2
Accounts receivable	$168,084	182700*92%
Cash	$9,400
Total market value of assets	$2,467,684
Market value of equity	2467684-1420000
Market value of equity	$1,047,684
Thus, market value of equity is $1,047,684