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 1,000,000 shares outstanding (1MM shares), and the share price (after the decision to shut down has been announced) is $4 per share. Here is the firms 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 firms 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.

1. Assuming your boss analysis is correct, what is your estimate of LastLandfills worth? Put your answer in units of $MM, and round to zero decimal places. IE: write 5 not 5.2 or 5,000,000.

2.

Should your firm buy shares of LastLandfill? Why or why not? Answer yes or no, and provide one reason for your answer.

a. Because your best estimate of the firms worth is significantly more than the market price of its equity.

b.No

c.Because your best estimate of the firms worth is not nearly as high as the firms GAAP equity.

d.Because your best estimate of the firms worth is significantly less than the market price of its equity.

e.Yes

f.Because your best estimate of the firms worth is not nearly as low as the firms GAAP equity.

g.Because the market value of the firms equity is smaller than the GAAP value of its equity.

h.Because the market value of the firms equity is larger than the GAAP value of its equity.

i. Not enough information is provided to determine a reason.

Because the firm will be out of business in a month.