Matthew owns a piece of land with a toy factory on it in a small town...

Matthew owns a piece of land with a toy factory on it in a small town near Melbourne city. The factory is a family business that started a century ago and is currently used to produce handmade wooden toys. However, for market participants, they would redevelop the land to build a retail shopping centre. Matthew recently received an attractive offer from property redevelopers, but he rejected the offer because he has no intention to stop the family business.

Which of the following statements is correct regarding the fair value of land?

Group of answer choices

The fair value of the land cannot be determined because we do not know the highest and best use of the asset.

The fair value of the land should be based on its current use as Matthew has no intention to sell the land and stop the family business.

The fair value of the land should be based on stand-alone valuation premise.

The fair value of the land should be based on in-combination valuation premise.

Solutions

Expert Solution

The fair value of the land should be based on in-combination valuation premise

The highest and best use of the land is determined by comparing the following:–

the value of the land as currently developed for produce handmade wooden toys (i.e. an assumption that the land would be used in combination with other assets, such as the factory, or with other assets and liabilities); and–

the value of the land to build a retail shopping centre, taking into account the costs of demolishing the factory and other costs necessary to convert land to build a retail shopping centre. The value under this use would take into account risks and uncertainties about whether the entity would be able to convert the asset to the alternative use (i.e. an assumption that the land would be used by market participants on a stand-alone basis).

The highest and best use of the land would be determined on the basis of the higher of these values.

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

A Bacon Factory is located in a small town. Also in the town is a Water...

A Bacon Factory is located in a small town. Also in the town is a Water Park. The smell of the Bacon factory has adversely affected the Water Park such that it has put in air cleaning equipment to eradicate the odor created by the factory. The cost function of the Bacon Factory is: CBF= B2 + 4B1/2 + (1 − x)2 where B denotes the quantity of bacon produced annually and x denotes the quantity of pollutants that A...

A Bacon Factory is located in a small town. Also in the town is a Water...

A Bacon Factory is located in a small town. Also in the town is a Water Park. The smell of the Bacon factory has adversely affected the Water Park such that it has put in air cleaning equipment to eradicate the odor created by the factory. Please show your work.. The cost function of the Bacon Factory is: CBF= B2 + 4B1/2 + (1 − x)2 where B denotes the quantity of bacon produced annually and x denotes the...

Matthew was hired to work at a factory here in Windsor. The factory currently employs 250...

Matthew was hired to work at a factory here in Windsor. The factory currently employs 250 people. He was very excited to start this new position because he just finished his program in an automotive technician, and he was going to be working on equipment to make parts for cars. He was hired at $20/hour and told there would be a 90-day probationary period. At the end of his probationary period, he would receive a raise of $5/hour. The company...

George Company purchased land for use as its corporate headquarters. A small factory that was on...

George Company purchased land for use as its corporate headquarters. A small factory that was on the land when it was purchased was torn down, and before the new building’s foundation could be constructed, a substantial amount of rock had to be blasted and removed. Because the office building is set back on the land far from the public road, George had the contractor construct a paved road from the public road to the parking lot of the office building....

Manufacturing Corp. owns a five-acre parcel of land. Its factory takes up one acre of this...

Manufacturing Corp. owns a five-acre parcel of land. Its factory takes up one acre of this land, and there is a mall on the other four acres. Manufacturing Corp. rents out retail space in the mall. To get rid of a troublemaker shareholder, Manufacturing Corp. wants to put all of the land into a subsidiary, sign a long-term lease for its own factory, and then split off this subsidiary by transferring it to the troublemaker shareholder in complete redemption of...

Barbara owns the sole hairdressing salon in a small country town. She has estimated the demand...

Barbara owns the sole hairdressing salon in a small country town. She has estimated the demand and marginal revenue for her product. They are P = 84 - 2Q (quantity) and MR = 84 - 4Q, respectively. She also experiences a constant marginal cost of $16. A) What is Barbara’s profit-maximising quantity? B) What price should Barbara charge at that profit-maximising quantity? C) Assume the average total cost (ATC) at the profit maximising output is $20. Calculate the profit or...

The mayor of a small town claims that in his town there is no significant difference...

The mayor of a small town claims that in his town there is no significant difference between the proportion of male and female (between the ages of 21 and 65) that have jobs. To test this claim, a statistician randomly sampled 30 male and 40 female residents and found that 25 males and 25 females have jobs. a. What are p^1and p^2? [ Sample answer: "phat1 = 0.262 ; phat2 = 0.635"] b. What is the Point Estimate for (p1−p2)?...

Matthew owns an insurance policy (face amount of $2,165,500) on the life of Emily with Uma...

Matthew owns an insurance policy (face amount of $2,165,500) on the life of Emily with Uma listed as the designated beneficiary. If Emily dies first and the $2,165,500 is paid to Uma, how much is included in the following gross estates? If an amount is zero, enter "0". a. Matthew's gross estate? b. Emily's gross estate?

Consider a plant that pollutes lead into the drinking water of a small town. The town...

Consider a plant that pollutes lead into the drinking water of a small town. The town is con- sidering a couple of interventions (i.e. taxation versus regulation) to address this problem. However, they are uncertain about the firm’s cost of reduction. Provide a solution to this problem. How does the policy instrument affect efficiency when cost are unknown. If Eliza is currently willing to trade 4 loaves of bread for 1 gallon of milk, then she must like loaves of...

piece of land owned by two brothers, Alvin (lecturer) and Alex (engineer) was disposed of land...

piece of land owned by two brothers, Alvin (lecturer) and Alex (engineer) was disposed of land for RM 1 million. The land was purchased in 2012 when a friend of Alex informed him of a sales advertisement in the newspaper. The brothers thought it would be a good idea to build homes for their families and their children’s families upon their retirement. Alvin withdrew money from the employees Provident Fund while Alex withdrew money from savings to pay for 80%...

Subjects