Seaweed Mfg., Inc. is currently operating at only 84 percent of fixed asset capacity. Current sales are $550,000

Seaweed Mfg., Inc. is currently operating at only 84 percent of fixed asset capacity. Current sales are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are needed?    A.  17.23 percent B.  17.47 percent C.  18.03 percent D.  18.87 percent E.  19.05 percent Full capacity sales = $550,000/0.84 = $654,761.90 Maximum sales growth = (654,761.90/$550,000) - 1 = 19.05 percent

92.

Seaweed Mfg., Inc. is currently operating at only 86 percent of fixed asset capacity. Fixed assets are $387,000. Current sales are $510,000 and are projected to grow to $664,000. What amount must be spent on new fixed assets to support this growth in sales?    A.  $0 B.  $22,654 C.  $46,319 D.  $79,408 E.  $93,608 Full capacity sales = $510,000/0.86 = $593,023.26 Capital intensity ratio = $387,000/$593,023.26 = 0.652588231 Fixed asset need = ($664,000 × 0.652588231) - $387,000 = $46,319

93.

Fixed Appliance Co. wishes to maintain a growth rate of 8 percent a year, a constant debt-equity ratio of 0.42, and a dividend payout ratio of 50 percent. The ratio of total assets to sales is constant at 1.3. What profit margin must the firm achieve?    A.  12.92 percent B.  13.46 percent C.  13.56 percent D.  14.33 percent E.  14.74 percent Retention ratio = 1 - 0.50 = 0.50 Sustainable growth rate = 0.08 = (ROE × 0.50)/[1 - (ROE × 0.50)]; ROE = 0.14815 Return on equity = 0.14815 = PM × (1/1.3) × (1 + 0.42); Profit margin = 13.56 percent