The Fairbanks Corporation has current assets with a book value of $300 and market value of $250. The firm's total non-current assets have a book value of $500 and market value of $750. The firm's net working capital has a book value of $200 and market value of $100. Fairbanks corporation has $300 in total long-term debt. Calculate the book value of the equity.

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Business

Koen Rivers

4 March, 15:07

The Fairbanks Corporation has current assets with a book value of $300 and market value of $250. The firm's total non-current assets have a book value of $500 and market value of $750. The firm's net working capital has a book value of $200 and market value of $100. Fairbanks corporation has $300 in total long-term debt. Calculate the book value of the equity.

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Gavyn · Answer 1

Book value of equity = $400

Explanation:

The book value of equity is also known as the the net asset value. It is determined by subtracting the total book value (as stated in the books in historical costs) of liabilities from the the total book value of assets.

Net Asset = Total assets - total liabilities

Net assets = $500 + $200 - $300

Net Asset = $400

Book value of equity = $400

Note that the current assets was not added because the net working capital is the current assets less current liabilities. So to include the current assets would mean double counting.