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Stone Roses Co. Balance Sheet for Dec. 31, 1999 Cash $50 Accounts payable $100 Inventory $150 Notes payable 100 Fixed assets $600 Long-term debt 350
Stone Roses Co. | ||||
Balance Sheet for Dec. 31, 1999 | ||||
Cash | $50 | Accounts payable | $100 | |
Inventory | $150 | Notes payable | 100 | |
Fixed assets | $600 | Long-term debt | 350 | |
Equity | 250 | |||
Total assets | $800 | Total liabilities & equity | $800 | |
Income statement for 1999 | ||||
Sales | $800 | |||
Costs | 600 | |||
EBT | $200 | |||
Taxes (34%) | 68 | |||
Net income | $132 |
Suppose the firm wishes to maintain a constant debt-equity ratio, retains 60% of net income, and raises no new equity. Assets and costs maintain a constant ratio to sales. What is the maximum increase in sales the firm can achieve?
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