Question

Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $15 million. The machinery can be sold to the Romulans today for $14 million. Klingon’s current balance sheet shows net fixed assets of $10 million, current liabilities of $870,000, and net working capital of $250,000. If all the current assets and current liabilities were liquidated today, the company would receive $1.17 million cash.

a.	What is the book value of Klingon’s total assets today? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
b.	What is the sum of the market value of NWC and the market value of fixed assets? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Answer 1

Given

Book Value of Fixed Asets = $ 100,00000

Current liabilities = $ 870000

Net Working Capital = $ 250000

We know that

Current Assets - Current liabilities = Net Working Capital

Current Assets- $ 870000= $ 250000

Current Assets = $ 250000+$ 870000

Current Assets = $ 1120000

a.Computation of Book Value of Assets

Book Value of Assets Today = Book Value of Current Assets+ Book Value of Fixed Assets

= $ 1120000+$ 100,00000

= $ 111,20000

Hence Book Value of Assets today is $ 111,20000

b.Computation of Sum of Market Value of NWC and Market Value of Fixed Assets

Total realized Value = Market Value of NWC+ Market Value of Fixed Assets

= $ 250000+$ 140,00000

= $ 142,50000

Hence the sum of Market value of NWC and Market Value of Fixed Assets is $ 142,50000

If you are having any doubts,please post a comment.

Thank you.please rate it.