Archer, Maddie and Dillon have been told that if they wish to fully acquire Sea Salt Surf
Archer, Maddie and Dillon have been told that if they wish to fully acquire Sea Salt Surf Ltd, it would cost approximately $50 million. From the balance sheet, they can see that the total assets of the company are approximately $42.5 million, but the company also has total liabilities of close to $6.8 million, leaving the net assets of the company at just over $35.7 million. Archer, Maddie and Dillon have come to you for advice because they are not sure why it would cost $50 million to purchase a company that has only $35.7 million of net assets. Advise whether the value of a company will or will not be equal to its net assets. Explain why this is the case and provide examples to assist in your explanation.
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