The Widget Co

question 45

Multiple Choice

The Widget Co.purchased new machinery three years ago for $4 million.The machinery can be sold to the Roman Co.today for $2 million.The Widget Co.'s current balance sheet shows net fixed 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 the Widget Co.'s assets today is _____ and the market value of those assets is _____.

• A)$4,600,000; $3,900,000
• B)$4,600,000; $3,125,000
• C)$5,000,000; $3,125,000
• D)$5,000,000; $3,900,000
• E)$6,500,000; $3,900,000

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Definitions:

X

Commonly used as a variable or unknown quantity in mathematics and algebra.

List Price

The manufacturer's suggested retail price that a product should be sold for.

Discounted

A reduced price or value, often as an incentive for purchase, representing a deduction from the usual cost of goods or services.

Discount Rate

The interest rate used to discount future cash flows to their present value.