Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
Mr. Ali is working as a new accountant at Oman Cable Company. He finds through the records that the book value of net working capital
Mr. Ali is working as a new accountant at Oman Cable Company. He finds through the records that the book value of net working capital and net fixed assets with the total of R.O 1.5 million while the total market value is estimated to be R.O 6 million. In contrast the book value of long-term debt and equity are R.O 0.5 million and R.O 1 million respectively whereas the market value of long-term debt is R.O 2.5 million and total equity is R.O 3.5 million. If the market value of assets declined 25% and the market value of long-term debt remained unchanged. What would happen to the market value of equity? a. Market value of equity will be dropped to R.O 4.5 million. b. Market value of equity will be dropped to R.O 0.875 million. c. Market value of equity will be dropped to R.0 6 million. d. Market value of equity will be remained unchanged. e. Market value of equity will be dropped to R.O 2 million. CLEAR MY CHOICE
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started