The Assets of Jensen Explorers Are Currently Worth $3,200

question 93

Multiple Choice

The assets of Jensen Explorers are currently worth $3,200. These assets are expected to be worth either $2,900 or $3,400 one year from now. The company has a pure discount bond outstanding
With a $3,000 face value and a maturity date of one year. The risk-free rate is 3.5 percent. What is
The value of the equity in this firm?

• A) 200.00
• B) $266.67
• C) $300.00
• D) $318.45
• E) $327.18

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Definitions:

Bad Debts Expense

Bad debts expense represents the amount of receivables a company estimates it will not be able to collect from customers over a period.

Aging of Receivable Method

An accounting technique used to estimate bad debts by analyzing accounts receivable based on the length of time they have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of receivables a company does not expect to actually collect.

Bad Debts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect due to customer defaults.