Market value of assets
Category: Business and Money > Accounting
Asked by: mammabear-ga
List Price: $20.00
26 Nov 2005 14:42 PST
Expires: 26 Dec 2005 14:42 PST
Question ID: 597851
In determining the market value of a company's assets, are current liabilities like accounts payable including in this determination. For example. A company has the following on it's balance sheet: Current Liabilities (A/P) $500,000 Long Term debt (6% annual coupon, maturing in 11/2023) $20,000,000 Common Stock - 2 million shares outstanding ($15.00 per share) Preferred Stock - 100,000 shares outstanding ($60.00 per share) What would be the market value of this company's assets?
Re: Market value of assets
Answered By: answerguru-ga on 27 Nov 2005 12:55 PST
Hi mammabear-ga, After your clarification, I see where you are coming from in your original question and can now answer the question for you. With the additional bond information that you have provided, we now have all of the pieces required to solve the problem. The objective of this problem is to manipulate the following equation: Assets = Liabilities + Equity Given that, as long as we are guaranteed that the listing of liabilities and equity are complete (including ALL current liabilities), we can determine the asset value of the company. I am verifying that in order to determine the asset value of the company, both of the steps you have taken are correct: 1. Include all liabilities provided (current and long term) as well as all equity. 2. The correct valuation for the bonds is today's selling price and not the face value. Therefore the total market value of this company's assets will be $55,500,000. If you need any further clarification please don't hesitate to ask. Cheers, answerguru-ga
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