LastLandfill The owners of LastLandfill Inc. have decided to shut down the firm within one month,...
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LastLandfill The owners of LastLandfill Inc. have decided to shut down the firm within one month, because it has no space to receive any more garbage. Accordingly, the firm will sell its assets, pay off its liabilities, and return any leftover cash to its shareholders; then it will forever close down. The firm has 2,000,000 shares outstanding (2MM shares), and the share price (after the decision to shut down has been announced) is $2 per share. Here is the firm's most recent Balance Sheet: GAAP Balance Sheet (All numbers in 000 unless otherwise noted. IE: Cash balance = 2,000,000 dollars.) Assets Cash 2,000 AR 4,000 Inventory 2,000 Net PPE 8,000 Land 3,000 Total Assets 19,000 Liabilities & Equity AP 2,000 Note 3,000 Loan 1,000 Total Liabilities 6,000 Equity 13,000 Your firm asks you to decide whether or not to buy shares of LastLandfill today. To help you, your boss says to assume that the market value of the firm's Inventory is about 50% of its GAAP value, and the value of the net PPE is 75% of its GAAP value. She says the land cannot be sold because it is full of garbage, and that LastLandfill will have to pay land remediation costs of $1,000K before it shuts down. She believes that the market value of all other Assets is as reported on the Balance Sheet. What is the stock market's estimate of LastLandfill's value to owners? Answer this question in millions of dollars. So for example, the Equity shown on the above GAAP Balance sheet reads 13,000 in units of thousands. If asked for the GAAP equity, the correct answer would be 13. Assuming your boss' analysis is correct, what is your estimate of LastLandfill's worth? Answer this question in millions of dollars. So for example, the Equity shown on the above GAAP Balance sheet reads 13,000 in units of thousands. If asked for the GAAP equity, the correct answer would be 13. Hint: The land remediation cost is a true liability that is not reflected on the LastLandfill's GAAP Balance Sheet. This liability needs to be considered in your estimate of the firm's worth. So, in this case, to get your estimated True Value Balance Sheet, you need to add this liability to the GAAP liabilities. LastLandfill The owners of LastLandfill Inc. have decided to shut down the firm within one month, because it has no space to receive any more garbage. Accordingly, the firm will sell its assets, pay off its liabilities, and return any leftover cash to its shareholders; then it will forever close down. The firm has 2,000,000 shares outstanding (2MM shares), and the share price (after the decision to shut down has been announced) is $2 per share. Here is the firm's most recent Balance Sheet: GAAP Balance Sheet (All numbers in 000 unless otherwise noted. IE: Cash balance = 2,000,000 dollars.) Assets Cash 2,000 AR 4,000 Inventory 2,000 Net PPE 8,000 Land 3,000 Total Assets 19,000 Liabilities & Equity AP 2,000 Note 3,000 Loan 1,000 Total Liabilities 6,000 Equity 13,000 Your firm asks you to decide whether or not to buy shares of LastLandfill today. To help you, your boss says to assume that the market value of the firm's Inventory is about 50% of its GAAP value, and the value of the net PPE is 75% of its GAAP value. She says the land cannot be sold because it is full of garbage, and that LastLandfill will have to pay land remediation costs of $1,000K before it shuts down. She believes that the market value of all other Assets is as reported on the Balance Sheet. What is the stock market's estimate of LastLandfill's value to owners? Answer this question in millions of dollars. So for example, the Equity shown on the above GAAP Balance sheet reads 13,000 in units of thousands. If asked for the GAAP equity, the correct answer would be 13. Assuming your boss' analysis is correct, what is your estimate of LastLandfill's worth? Answer this question in millions of dollars. So for example, the Equity shown on the above GAAP Balance sheet reads 13,000 in units of thousands. If asked for the GAAP equity, the correct answer would be 13. Hint: The land remediation cost is a true liability that is not reflected on the LastLandfill's GAAP Balance Sheet. This liability needs to be considered in your estimate of the firm's worth. So, in this case, to get your estimated True Value Balance Sheet, you need to add this liability to the GAAP liabilities.
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Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
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