Foursonic Labs has cash of $26,000, receivables of $85,000, and inventory of $118,000. In addition, the firm has property, plant, and equipment of $165,000. Management has also told you that you can reasonably expect to collect 89 percent of the receivables, that the inventory could be sold to realize 85 percent of its book value, and that the sale of the property, plant, and equipment would yield $125,000. What is the liquidation value of this company? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To find the liquidation value of the company, we need to add up the amounts that can be realistically realized from its assets.

Cash = $26,000
Receivables (89% collectible) = $85,000 x 0.89 = $75,650
Inventory (85% of book value) = $118,000 x 0.85 = $100,300
PP&E = $125,000

Total liquidation value = $26,000 + $75,650 + $100,300 + $125,000 = $326,950

Therefore, the best choice is D.

Foursonic Labs Has Cash of $26,000, Receivables of $85,000, and Inventory