3. Excess capacity adjustments

Water and Power Co. (W&P) currently has $645,000 in total assets and sales of $1,550,000. Half of W&Ps total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 22% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is $

.

W&P was using its fixed assets at only 92% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets?

$1,600,544

$1,684,783

$1,347,826

$1,769,022

When you consider that W&Ps fixed assets were being underused, its target fixed assets to sales ratio should be ___%.

When you consider that W&Ps fixed assets were being underused, how much fixed assets must W&P raise to support its expected sales for next year?

$41,448

$31,579

$37,500

$39,474