Question

A firm has net working capital of $8,100 and current assets of $14,600. Total assets equal...

A firm has net working capital of $8,100 and current assets of $14,600. Total assets equal $32,900. What is the book value of the firm if long term debt is $7,500?

1. $2,700

2. $10,800

3. $17,300

4. $18,900

5. $22,500

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Answer #1

Answer: Option 4 is correct.
Book value of the firm=Total assets-(Current assets-Net working capital)-Long term debt
Given that:
Total assets=$32900
Current assets=$14600
Net working capital=$8100
Long term debt=$7500
Book value of the firm=$32900-($14600-$8100)-$7500
=$32900-$6500-$7500
=$18900

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