ACME acquires land and manufacturing facility in a business combination and need

Question

ACME acquires land and manufacturing facility in a business combination and needs to determine the fair value. The fair value of the land and building if they continued to be used for manufacturing is $40 million. If sold, the land is worth $28 million and the equipment could be sold for $5 million. Nearby areas have recently been developed for residential use as sites for high rise condominiums. In this use the land would be worth $33 million and the equipment could still be sold for $5 million. ACME’s management would like to base the fair value of the land and manufacturing facility on its use as a residential site. Do you agree?

Explanation / Answer

ACME acquires land and manufacturing facility in a business combination and need

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