Question

Monk Consortium Corp. (Monk-Con) currently has $645,000 in total assets and sales of $1,550,000. Half of Monk-Con's total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 22% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is $ Monk-Con was using its fixed assets at only 93% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? $1,666,667 $1,333,334 $1,750,000 $1,500,000 When you consider that Monk-Con's fixed assets were being underused, its target fixed assets to sales ratio should be % When you consider that Monk-Con's fixed assets were being underused, how much fixed assets must Monk-Con raise to support its expected sales for next year? O $39,067 0 O $34,726 0 $43,408 0 $45,578

Answer 1

$ 70,950 Additional assets -645000*50%*22% $1,666,667 Maximum supported sales -1550000/93% 19.35% Target fixed assets to sales ratio 645000*50%/1666667 43,408 Fixed assets purchase 1550000* (1+22%)* 19.35%-645000*50%

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