CORPORATE FINANCE(LL)
11th Edition
ISBN: 9781260430011
Author: Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 2, Problem 3QP
Market Values and Book Values Klingon Cruisers, Inc., purchased new cloaking machinery three years ago for $9.5 million. The machinery can be sold to the Romulans today for $6.5 million. Klingon’s current
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
XXX plc purchased new machinery three years ago for £4 million. The machinery can be sold today for £2 million. XXX plc's current statement of financial position shows net non-current assets of £2,500,000, current liabilities of £1,375,000, and net working capital of £725,000. If all the current assets were liquidated today, the company would receive £1.9 million in cash. The book value of XXX plc's assets today is _____ and the market value of those assets is ____.
Klingon Widgets, lnc., purchased new cloaking machinery four years ago for $12 million. The machinery can be sold to the Romulans today for $10.8 million. KlingonOs current balance sheet shows net fixed assets of $10 million, current liabilities of $ 850, 000, and net working capital of $249, 000. If all the current assets were liquidated today, the company would receive $1.16 million cash. What is the book value of Klingons total assets today? What is the market value?
Klingon Widgets, Inc., purchased new cloaking machinery five years ago for $10 million. The machinery can be sold to the Romulans today for $9.4 million. Klingon’s current balance sheet shows net fixed assets of $8 million, current liabilities of $810,000, and net working capital of $247,000. If all the current assets and current liabilities were liquidated today, the company would receive $1.14 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.)
Chapter 2 Solutions
CORPORATE FINANCE(LL)
Ch. 2 - Prob. 1CQCh. 2 - Prob. 2CQCh. 2 - Prob. 3CQCh. 2 - Prob. 4CQCh. 2 - Prob. 5CQCh. 2 - Cash Flow from Assets Why is it not necessarily...Ch. 2 - Operating Cash flow Why is it not necessarily bad...Ch. 2 - Net Working Capital and Capital Spending Could a...Ch. 2 - Cash Flow to Stockholders and Creditors Could a...Ch. 2 - Prob. 10CQ
Ch. 2 - Building a Balance Sheet Sankey, Inc., has current...Ch. 2 - Building an Income Statement Shellon, Inc., has...Ch. 2 - Market Values and Book Values Klingon Cruisers,...Ch. 2 - Prob. 4QPCh. 2 - Calculating OCF Barrell, Inc., has sales of...Ch. 2 - Calculating Net Capital Spending Gordon Driving...Ch. 2 - Building a Balance Sheet The following table...Ch. 2 - Cash Flow to Creditors The 2014 balance sheet of...Ch. 2 - Cash. Flow to Stockholders The 2014 balance sheet...Ch. 2 - Prob. 10QPCh. 2 - Cash Flows Ritter Corporations accountants...Ch. 2 - Financial Cash flows The Stancil Corporation...Ch. 2 - Building an Income Statement During the year, the...Ch. 2 - Calculating total Cash Flows Schwert Corp. shows...Ch. 2 - Using Income Statements Given the .following...Ch. 2 - Prob. 16QPCh. 2 - Marginal versus Average Tax Rates (Refer to Table...Ch. 2 - Prob. 18QPCh. 2 - Accounting Values versus Cash Flows In Problem 18,...Ch. 2 - Calculating Cash Flows Cusic Industries had the...Ch. 2 - Prob. 21QPCh. 2 - Use the following information for Ingersoll, Inc.,...Ch. 2 - Prob. 23QPCh. 2 - Prob. 24QPCh. 2 - Net Fixed Assets and Depreciation On the balance...Ch. 2 - Prob. 26QPCh. 2 - Prob. 1MCCh. 2 - Prob. 2MCCh. 2 - Prob. 3MC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Cost of Capital, Net Present Value Leakam Companys product engineering department has developed a new product that has a 3-year life cycle. Production of the product requires development of a new process that requires a current 100,000 capital outlay. The 100,000 will be raised by issuing 60,000 of bonds and by selling new stock for 40,000. The 60,000 in bonds will have net (after-tax) interest payments of 3,000 at the end of each of the 3 years, with the principal being repaid at the end of Year 3. The stock issue carries with it an expectation of a 17.5% return, expressed in the form of dividends at the end of each year (with 7,000 in dividends expected for each of the next 3 years). The sources of capital for this investment represent the same proportion and costs that the company typically has. Finally, the project will produce after-tax cash inflows of 50,000 per year for the next 3 years. Required: 1. Compute the cost of capital for the project. (Hint: The cost of capital is a weighted average of the two sources of capital, where the weights are the proportion of capital from each source.) 2. CONCEPTUAL CONNECTION Compute the NPV for the project. Explain why it is not necessary to subtract the interest payments and the dividend payments and appreciation from the inflow of 50,000 in carrying out this computation.arrow_forwardKlingon Widgets, Inc.., purchased new cloaking machinery three years ago for $7 million. The machinery can be sold to the Romulans today for $4.9 million. Klingon's current balance sheet shows net fixed assets of $3.7 million, current liabilities of $1.1 million, and net working capital of $380,000. If all the current assets were liquidated today, the company would receive $1.6 million cash. What is the book value of Klingon's assets today?arrow_forwardMuffins masonry incs balance sheet list next fixed assets as $ 14 million. The fixed assets could currently be sold for 19 million dollars. muffins current balance sheet shows current liabilities of 5.5 million dollars and networking capital of 4.5 million dollars. if all the current accounts were liquidated today the company would receive 7.25 million dollars cash after paying the 5.5 million incurrent liabilities. what is the book value of muffins missionaries assets today and market value of these assets? Enter answers in millions of dollars rounded to 2 decimal places Book value. Market value. Current assets: Fixed assets: Total:arrow_forward
- Klingon Widgets, Incorporated, purchased new cloaking machinery three years ago for $4.0 million. The machinery can be sold to the Romulans today for $6.2 million. Klingon’s current balance sheet shows net fixed assets of $2.8 million, current liabilities of $710,000, and net working capital of $130,000. If all the current accounts were liquidated today, the company would receive $825,000 cash. What is the book value of Klingon’s total assets today? What is the sum of the market value of NWC and the market value of fixed assets?arrow_forwardKlingon Widgets, Incorporated, purchased new cloaking machinery three years ago for $4.4 million. The machinery can be sold to the Romulans today for $6.6 million. Klingon’s current balance sheet shows net fixed assets of $3.2 million, current liabilities of $750,000, and net working capital of $134,000. If all the current accounts were liquidated today, the company would receive $865,000 cash. What is the book value of Klingon’s total assets today? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567. What is the sum of the market value of NWC and the market value of fixed assets? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.arrow_forwardAmazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of…arrow_forward
- Amazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of…arrow_forwardAmazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of…arrow_forwardPororo Inc. is considering acquiring Orange Company and uses the following data for analysis: Average annual sales for the past 5 years P2,000,000 Average annual operating expenses for the past 5 years 1,200,000 Average annual cost of goods sold for the past 5 years 7,200,000 Annual increase in depreciation and amortization 750,000 Expected annual increase in wages not to be recovered by increase in revenue 400,000 The book value of Orange’s net identifiable net assets is P8,500,000. The appropriate rate of return is20%. Revaluations were summarized as follows: Revaluation of inventory to fair value P500,000 Increase in allowance for bad debts 50,000 Revaluation of property, plant and equipment to fair value 250,000 Revaluation of bonds payable due to decline in interest 350,000 Fair value of patent 1,250,000 Determine the following as a result of your audit:46.How much should Pororo recognize as goodwill upon acquisition…arrow_forward
- Amazing Brentwood Inc. bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year 2018, the firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. 1. Given this information, determine the value of the terminal loss or recapture at the end of year 5. 2. What are the earnings before interest and taxes in the year 2018? 3. What is the after-tax net profit for the year 2018? The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company’s ROE has…arrow_forwardAmazing Brentwood Inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value. In the year of 2018, The firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710. 1. Given this information, determine the value of the terminal loss or recapture at the end of the year. 2. What are the earnings before interest and taxes in the year 2018? 3. What is the after-tax net profit for the year 2018?arrow_forwardManson Builders Inc. company bought a machine three years ago for $6 million. The machine can be sold to Rason Builders, Inc. today for $5.4 million. Manson's current balance sheet shows net fixed assets of $3.5 million, current liabilities of $945, 000, and net working capital of $275,000. If the current assets and current liabilities were liquidated today, the company would receive a total of $1.25 million cash. What is the book value of Manson's total assets today? (Please express the value as million dollars and keep two digits after the decimal point. Note: if your answer is 1.23 million, please just enter 1.23 in the blank below.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License