6. MPI has $2,000,000 in current assets and $1,500,000 million in current liabilities (so its current ratio is now 1.3333). MPI's initial inventory is $500,000. MPI plans to borrow long- term debt (10-year loans) and use the funds to increase inventory. How much additional inventory can MPI purchase with long-term loans without pushing its current ratio above 1.80?

Here is the formula sheet:

3\&4-16 Exam 2 Formula Sheet TotalDebttoTotalCapitalizationRatio=STD+LTD+TESTD+LTDTimesInterestEarned=InterestExpenseEBITCashCoverageRatio=EBIT+DepreciationInterestExpenseInventoryTurnover=CostofGoodsSoldInventoryIC=STNP+TM+EQIC=TA(AP+ACCrQ)DaysSalesinInventory=InventoryTurnover365days=COGS/365INV Receivables Turnover = Sales Accounts Receivables FixedAssetTurnover=NetFixedAssets TotalAssetTurnover(TAT)=TotalAssetsSalesGrossProfitMargin(GPM)=SalesGrossprofitOperatingProfitMargin(OPM)=SalesEBITNetProfitMargin(NPM)=SalesNetIncomeReturnoninvestedcapital(ROIC)=InvestedCapitalEBIT(1T)ReturnonAssets(ROA)=TotalAssetsNetIncomeBasicEarningsPower(BEP)=TotalAssetsEBIT ReturnonEquity(ROE)=TotalEquityNetIncome Price-EarningsRatio(P/E)=EarningsPerShareMarketPriceperShare Market-Book Ratio (P/B)=BookvalueperShareMarketPriceperShare Full capacity sales = Sales ROE=ROAEMROE=NPMTATEM Percent of capacity used to generate sales level