Settetocol, Inc., has cash of $12,000, receivables of $35,000, and inventory of $28,000. In addition, the firm has fixed assets of $120,000. Management has also told you that you can reasonably expect to collect 93 percent of the receivables, that the inventory could be sold to realize 84 percent of its book value, and that the sale of the property, plant, and equipment would yield $94,000. What is the liquidation value of this company? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The liquidation value is the amount of cash that can be raised by selling off the assets of a company. In this case, the liquidation value is $162,070. This is calculated as follows:Cash: $12,000Receivables: $35,000 x 93% = $32,550Inventory: $28,000 x 84% = $23,520Fixed assets: $120,000 x 94% = $112,800Total liquidation value: $12,000 + $32,550 + $23,520 + $112,800 = $162,070