Question

Newtown Propane currently has $490,000 in total assets and sales of $1,820,000. Half of Newtown’s total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 19% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is $ . (Note: Round your answer to the nearest whole number.) Newtown was using its fixed assets at only 94% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? (Note: Round your answer to the nearest whole number.) $1,839,362 $1,548,936 $1,936,170 $2,323,404

Answer 1

c. $1,936,170

Step-by-step explanation:

Additional assets required to support this sales growth = Growth * Total assets

Additional assets required = 19% * $490,000

Additional assets required = $93,100

Sales at 100% capacity = $1,820,000 / 94%

Sales at 100% capacity = $1,820,000 / 0.94

Sales at 100% capacity = $1,936,170.21