Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the discussion of efn in the chapter implicitly as

The discussion of EFN in the chapter implicitly assumed that the company was operating at...

70.2K

Verified Solution

Question

Finance

image
The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. Assume that Rosengarten was operating at 90 percent capacity. Full-capacity sales would be $1,000/,90=$1,111. The balance sheet shows $1,800 in fixed assets. The capital intensity ratio for the company is: Capital intensity ratio = Fixed assets/Full-capacity sales =$1,800/$1,111=1.62 This means that Rosengarten needs $1.62 in fixed assets for every dollar in sales when it reaches full capacity. At the projected sales level of $1,250, it needs $1,2501.62= $2,025 in fixed assets, which is $225 lower than our projection of $2,250 in fixed assets. So, EFN is $565225=$340. Blue Sky Mfg., Inc., is currently operating at 90 percent of fixed asset capacity. Current sales are $738,000 and sales are projected to grow to $843,000. The current fixed assets are $703,000. How much in new fixed assets is required to support this growth in sales? (Do not round intermediate calculations and round your answer to the nearest dollar amount, e.g., 32.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students