Quantitative Problem 1: Beasley Industries'sales are expected to increase from $5 million in 2015 to $6million in 2016, or by 20%. Its assets totaled $3 million at theend of 2015. Beasley is at full capacity, so its assets must growin proportion to projected sales. At the end of 2015, currentliabilities are $720,000, consisting of $170,000 of accountspayable, $350,000 of notes payable, and $200,000 of accruedliabilities. Its profit margin is forecasted to be 4%, and itsdividend payout ratio is 70%. Using the AFN equation, forecast theadditional funds Beasley will need for the coming year. Do notround intermediate calculations. Round your answer to the nearestdollar.
$  

The AFN equation assumes that ratios remain constant. However,firms are not always operating at full capacity so adjustments needto be made to the existing asset forecast. Excess capacityadjustments are changes made to the existing asset forecast becausethe firm is not operating at full capacity. For example, a firm maynot be at full capacity with respect to its fixed assets. First,the firm's management must find out the firm's full capacity salesas follows:

Next, management would calculate the firm's target fixed assetsratio as follows:

Finally, management would use the target fixed assets ratio withthe projected sales to calculate the firm's required level of fixedassets as follows:

Required level of fixed assets = (Target fixedassets/Sales) × Projected sales

Quantitative Problem 2: Mitchell ManufacturingCompany has $1,700,000,000 in sales and $360,000,000 in fixedassets. Currently, the company's fixed assets are operating at 75%of capacity.

1. What level of sales could Mitchell have obtained if it had beenoperating at full capacity? Do not round intermediate calculations.Round your answer to the nearest dollar.
   $  
2. What is Mitchell's Target fixed assets/Sales ratio? Do notround intermediate calculations. Round your answer to two decimalplaces.
   %
3. If Mitchell's sales increase by 50%, how large of an increasein fixed assets will the company need to meet its Target fixedassets/Sales ratio? Do not round intermediate calculations. Roundyour answer to the nearest dollar.
   $