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% ofcapacity.a. What level of sales could Earleton have obtained if it had been operating at fullcapacity?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 thecompany need to meet its target fixed assets/sales ratio?
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% ofcapacity.a. What level of sales could Earleton have obtained if it had been operating at fullcapacity?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 thecompany need to meet its target fixed assets/sales ratio?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 20P
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Question
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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