Hayes Co is considering selling off one of its subsidiaries, Fran Ltd., and would like to value its inventory of 1500 large storage boxes. The following information has been made available:
Market
Sales price per unit
Volume of sales of Fran Ltd
Volume of sales of storage boxes
Transaction costs per storage box
Transportation costs per storage box
North
£85
4,000
100,000
£5
£3
Midlands
£90
8,000
64,000
£3
£7
South
£82
3,000
N/A
£8
£6
Hayes is suggesting that the fair value per unit of storage box should be £82.
Required:
Comment on whether this is appropriate given the circumstances.
