Question

# Muffin’s Masonry, Inc.’s balance sheet lists net fixed assets as \$34 million. The fixed assets could...

Muffin’s Masonry, Inc.’s balance sheet lists net fixed assets as \$34 million. The fixed assets could currently be sold for \$59 million. Muffin’s current balance sheet shows current liabilities of \$15.5 million and net working capital of \$14.5 million. If all the current accounts were liquidated today, the company would receive \$8.25 million cash after paying the \$15.5 million in current liabilities.

 book value market value (in millions of dollars) current assets fixed assets total

Let's begin by calculating the net working capital:

Net working capital (NWC) = Current assets (CA) - Current liabilities (CL)

14.5 mil. = CA - 15.5 million

CA = 30 million

Therefore, the book value (BV) of CA = 30 million.

Now let's calculate the book value of the total assets:

BV of total assets (TA) = BV of CA + BV of fixed assets (FA)

BV of total assets = \$30 million + \$34 million = \$64 million

Finally, let's calculate the market value of the current and total assets:

Market value (MV) of CA = 15.5 million + 8.25 million = 23.75 million

MV of TA = MV of FA + MV of CA

MV of TA = 59 million + 23.75 million

MV of TA = \$82.76 million