You recently purchased a grocery store. At the time of the purchase, the store's market value and its book value were equal. The purchase included the building, fixtures, and inventory. Which one of the following is most apt to cause the market value of this store to be less than its book value?

a. The replacement of old inventory items with more desirable products.

b. Addition of a stop light at the main entrance to the store's parking lot.

c. A sudden and unexpected increase in inflation.

d. Improvements to the surrounding area by other store owners.

e. Construction of a new restricted access highway located between the store and the surrounding residential areas.

Question

Business

Quinten Montes

13 July, 09:00

You recently purchased a grocery store. At the time of the purchase, the store's market value and its book value were equal. The purchase included the building, fixtures, and inventory. Which one of the following is most apt to cause the market value of this store to be less than its book value?

a. The replacement of old inventory items with more desirable products.

b. Addition of a stop light at the main entrance to the store's parking lot.

c. A sudden and unexpected increase in inflation.

d. Improvements to the surrounding area by other store owners.

e. Construction of a new restricted access highway located between the store and the surrounding residential areas.

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Answers (1)

Know the Answer?

Luciano Murray · Answer 1

The correct answer is letter "E": Construction of a new restricted access highway located between the store and the surrounding residential areas.

Explanation:

The market value of an asset is the dollar value at what the asset can be sold in a competitive market. On the other hand, the book value of the asset represents the dollar value at what the asset was purchased including any change to the asset such as depreciation.

Thus, a construction not allowing customers to access a grocery store is likely to reduce the property's market value compared to the property's book value.