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EXCESS CAPACITY Earleton Manufacturing Company has $3 billion in sales and $787,500,000 in fixed assets. Currently, the company’s fixed assets are operating at 80% of capacity. a. What level of sales could Earleton have obtained if it had been operating at full capacity? b. What is Earleton’s target fixed assets/sales ratio? c. If Earleton’s sales increase 30%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio?

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

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Chapter
Section
Chapter 16, Problem 12P
Textbook Problem

EXCESS CAPACITY Earleton Manufacturing Company has $3 billion in sales and $787,500,000 in fixed assets. Currently, the company’s fixed assets are operating at 80% of capacity.

  1. a. What level of sales could Earleton have obtained if it had been operating at full capacity?
  2. b. What is Earleton’s target fixed assets/sales ratio?
  3. c. If Earleton’s sales increase 30%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio?

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