Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I need help with the following Problem. Below I attached an Example problem leton Manufacturing Company has $2 billion in sales and $668,000,000 in fixed

I need help with the following Problem. image text in transcribedBelow I attached an Example problem

image text in transcribed leton Manufacturing Company has $2 billion in sales and $668,000,000 in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity. a. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answers completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar. $ b. What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal places. % c. If Earleton's sales increase 40%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer completely. Do not round intermediate calculations. Round your answer to the nearest dollar. $ a. Sales =$3,000,000,000; Fixed assets =$883,000,000; Fixed assets are operated at 85% capacity. Full capacity sales = Actual sales/( % of capacity at which Fixed assets are operated) =$3,000,000,000/0.85=$3,529,411,764.7059$3,529,411,765 b. Target Fixed assets/Sales ratio =$883,000,000/$3,529,411,764.7059 =0.2501833325.02% c. Sales increase 40%; Fixed assets = ? S1=$3,000,000,0001.40=$4,200,000,000 No increase in Fixed assets up to $3,529,411,764.7059 Fixedassets=0.25018333($4,200,000,000$3,529,411,764.7059)=0.25018333$670,588,235.29412=$167,770,000 Solution Correct Response Earleton Manufacturing Company has $3 billion in sales and $883,000,000 in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity. a. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answers completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar. $ b. What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal places. % c. If Earleton's sales increase 40%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer combletelv. Do not round intermediate calculations. Round your answer to the nearest dollar. $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quantitative Corporate Finance

Authors: John B. Guerard Jr. Anureet Saxena, Mustafa Gultekin

2nd Edition

3030435466, 978-3030435462

More Books

Students also viewed these Finance questions