Use the Following Information to Answer the Question(s) Below

question 133

Multiple Choice

Use the following information to answer the question(s) below.
Baubles and Bells, a small business, is up for sale. The book value of its assets is $397,650, and its liabilities have a book value of $148,500. After adjusting for market value, total assets are worth $386,475, and total liabilities are $153,600. The business is considered to be a "normal risk" venture. The new owner (if he buys) plans to draw a salary of $28,000. Estimated earnings for the upcoming year are $88,400. Complete net earnings estimates for the next five years are:
Pessimistic Most Likely Optimistic
Year 1 $82,000 $88,400 $90,500
Year 2 $85,000 $90,000 $93,000
Year 3 $88,000 $92,500 $95,500
Year 4 $91,000 $95,000 $97,000
Year 5 $94,000 $97,000 $98,500
-Using the adjusted balance sheet technique, what is the business worth?

• A) $397,650
• B) $386,475
• C) $249,150
• D) $232,875

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Definitions:

Eugene V. Debs

An American socialist, political activist, trade unionist, and five times the candidate of the Socialist Party of America for President of the United States.

Espionage Act

A United States federal law passed in 1917 that made it a crime to convey information intended to interfere with the U.S. armed forces' operations or to promote the success of the country's enemies during wartime.

Anti-War Speech

Public discourse or address that argues against the initiation, continuation, or support of military conflicts and wars.

Manufacture and Sale

The process of creating goods through various forms of production and then offering them for purchase to consumers.