45) Wood Refinishers currently has $298,900 in sales and is operating at 86 percent of the firm’s
capacity. The dividend payout ratio is 40 percent and cost of goods sold is $211,300. What is the
full capacity level of sales?
A) $245,697.67
B) $208,534.88
C) $347,558.14
D) $211,300.00
E) $254,500.00
46) Rural Markets has $878,000 of sales and $913,000 of total assets. The firm is operating at 93
percent of capacity. What is the capital intensity ratio at full capacity?
A) .62
B) .88
C) .97
D) 1.03
E) 1.14
47) Ed’s Market is operating at full capacity with a sales level of $547,200 and fixed assets of
$471,000. The profit margin is 5.4 percent. What is the required addition to fixed assets if sales
are to increase by 4 percent?
A) $10,709
B) $14,680
C) $22,400
D) $16,760
E) $18,840
48) The Steel Mill is currently operating at 84 percent of capacity. Annual sales are $28,400 and
net income is $2,250. The firm has current liabilities of $2,700, long-term debt of $9,800, net
fixed assets of $16,900, net working capital of $5,000, and owners’ equity of $12,100. All costs
and net working capital vary directly with sales. The tax rate and profit margin will remain
constant. The dividend payout ratio is constant at 40 percent. How much additional debt is
required if no new equity is raised and sales are projected to increase by 12 percent?
A) −$810
B) −$912
C) −$642
D) $264
E) $358
49) Muder’s Market has sales of $28,400, net income of $2,250, and a retention ratio of 60
percent. Assume the profit margin and the payout ratio are constant and sales increase by 6
percent. What is the pro forma retained earnings if the current retained earnings balance is
$4,100?
A) $5,450
B) $5,721
C) $5,531
D) $5,648
E) $5,028
50) Assume a firm is currently operating at 98 percent of capacity with sales of $28,400. Next
year, sales are projected to increase to $35,000. What is the projected addition to fixed assets if
the firm currently has fixed assets of $16,900 and total assets of $24,600?
A) $0
B) $3,511
C) $2,629
D) $580
E) $1,688
51) Black Top Express has $1,320 of cash, inventory of $10,200, net fixed assets of $33,600,
accounts payable of $3,650, accounts receivable of $3,780, and long-term debt of $18,100. All
costs, net working capital, and fixed assets vary directly with sales. Sales are projected to
increase by 4.8 percent annually. What is the pro forma net working capital for next year?
A) $15,988
B) $16,684
C) $12,209
D) $17,878
E) $11,800
52) Miller’s Hardware has current sales of $42,700, EBIT of $9,700, net income of $6,600,
interest expense of $1,360, and dividends paid of $1,925. Assume the profit margin, debt-equity
ratio, and dividend payout ratio are held constant. Sales are expected to increase by $8,000 next
year. What is the projected change to retained earnings for next year?
A) $5,575
B) $4,994
C) $4,909
D) $5,551
E) $5,386
53) Dexter’s has annual sales of $53,800, current assets of $18,900, and net working capital of
$2,800. Assume this firm is operating at full capacity and that all costs, net working capital, and
fixed assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are
constant. What is the pro forma current liabilities value for next year if sales are projected to
increase by 7.5 percent?
A) $13,650
B) $17,308
C) $19,121
D) $14,248
E) $16,810
54) M&M Tools is currently operating at 88 percent of capacity. All costs and net working
capital vary directly with sales. What is the amount of the pro forma net fixed assets for next
year if sales are projected to increase by 13 percent and the firm currently has $33,600 of net
fixed assets?
A) $33,600
B) $33,412
C) $38,101
D) $37,968
E) $42,148
55) The Outlet has a capital intensity ratio of .87 at full capacity. Currently, total assets are
$48,900 and current sales are $53,600. At what level of capacity is the firm currently operating?
A) 87.00 percent
B) 91.67 percent
C) 95.36 percent
D) 96.08 percent
E) 98.21 percent
56) Hench’s has annual sales of $56,900 is currently operating at 86 percent of capacity. What is
the full-capacity level of sales?
A) $48,934
B) $47,740
C) $66,163
D) $105,834
E) $64,866
57) Marco’s has current annual sales of $52,600, net fixed assets of $38,900, and total assets of
$56,300. The firm is currently operating at 79 percent of capacity. What is the capital intensity
ratio at full capacity?
A) 1.18
B) 1.10
C) .96
D) .91
E) .85
58) The Broom Maker currently has annual sales of $387,000 and is operating at 88 percent of
capacity. The profit margin of 5.5 percent and the dividend payout ratio of 30 percent are
projected to remain constant. What is the projected addition to retained earnings for next year
based on a sales growth rate of 4.8 percent?
A) $12,309
B) $15,615
C) $7,890
D) $6,692
E) $714
59) The Corner Store has sales of $68,900, dividends of $1,960, and net income of $4,900. The
firm is expecting sales to decrease by 3 percent next year while the profit margin remains
constant. The firm wants to increase the dividend payout ratio by a fixed 2.5 percent. What is the
projected increase in retained earnings for next year?
A) $1,711
B) $1,867
C) $2,733
D) $1,969
E) $3,438
60) The Mill Press is operating at 94 percent of its fixed asset capacity and has current sales of
$611,000. How much can the firm grow before any new fixed assets are needed?
A) 4.99 percent
B) 5.78 percent
C) 6.02 percent
D) 6.38 percent
E) 6.79 percent
61) Ausel’s Cabinets has $27,600 in net fixed assets and is operating at 96 percent of capacity.
Sales are $36,200 currently. What is the required increase in fixed assets if sales are projected to
increase by 14 percent?
A) $4,205
B) $3,400
C) $6,833
D) $0
E) $2,605
62) Porter’s Corner has sales of $4,650 net income of $490, total assets of $5,820, and total debt
of $2,760. Assets and costs are proportional to sales. Debt and equity are not. No dividends or
taxes are paid. Next year’s sales are projected to be $5,487. What is the amount of the external
financing needed?
A) −$28
B) $469
C) $611
D) $1,048
E) $823
63) LL Companies has sales of $9,800, net income of $1,060, total assets of $8,950, and total
debt of $4,760. Assets and costs are proportional to sales. Debt and equity are not. A dividend of
$371 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are
projected to be $10,584. What is the amount of the external financing need?
A) $716
B) $1,333
C) −$1,574
D) −$382
E) −$28
64) Nu Tek has sales of $19,700, net income of $3,517, fixed assets of $18,282, current liabilities
of $2,940, current assets of $3,018, long-term debt of $7,600, and equity of $10,760. Assets,
costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The
company maintains a constant 50 percent dividend payout ratio. Next year’s sales are projected to
increase by 7 percent. What is the amount of external financing needed if the firm is currently
operating at full capacity?
A) −$596
B) −$141
C) $583
D) $912
E) −$482
65) The Atlantic Co. is an all-equity company with sales of $21,600, costs of $14,780,
depreciation of $2,000, and taxes of $1,012. The dividend payout ratio is 12 percent. Sales are
expected to increase by 22 percent next year. What is the pro forma addition to retained earnings
assuming all costs vary proportionately with sales?
A) $4,899
B) $3,745
C) $3,892
D) $4,011
E) $4,088
66) Seaweed Mfg. is currently operating at only 84 percent of fixed asset capacity. Current sales
are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are
needed?
A) 17.23 percent
B) 17.47 percent
C) 18.03 percent
D) 18.87 percent
E) 19.05 percent
67) James Mfg. is currently operating at only 86 percent of fixed asset capacity. Fixed assets are
$387,000. Current sales are $510,000 and are projected to grow to $664,000. What amount must
be spent on new fixed assets to support this growth in sales?
A) $0
B) $22,654
C) $46,319
D) $79,408
E) $93,608
68) Wilson’s is currently operating at maximum capacity. The firm has a net income of $2,250,
total assets of $24,600, long-term debt of $9,800, accounts payable of $2,700, dividends of $900,
and total equity of $12,100. All costs, assets, and current liabilities vary directly with sales. The
tax rate and the dividend payout ratio will remain constant. How much additional debt is required
if no new equity is raised and sales are projected to increase by 5 percent?
A) −$323
B) −$467
C) $0
D) $108
E) $367
69) The Paper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly
with sales. The dividend payout ratio is constant. The firm has sales of $42,700, net income of
$5,500, total assets of $48,900, current liabilities of $3,650, long-term debt of $18,100, owners’
equity of $27,150, and dividends of $1,925. What is the external financing need if sales increase
by 14 percent?
A) −$1,816
B) −$1,268
C) $1,031
D) $3,504
E) $2,260
70) Deep Hollow Mills has sales of $254,600 and a profit margin of 5.2 percent. The firm has
retained earnings of $113,200 after paying its annual dividend of $7,500. What is the pro forma
retained earnings for next year if this firm grows at a rate of 3.6 percent and both the profit
margin and the dividend payout ratio remain constant?
A) $117,704.74
B) $123,771.10
C) $113,592.08
D) $105,921.22
E) $119,145.81
71) LM Products has total assets of $48,900, total debt of $21,750, long-term debt of $18,100,
owners’ equity of $27,150, dividends paid of $1,925, and net income of $5,500. Assume net
working capital and all company costs increase directly with sales. Also assume the tax rate and
the dividend payout ratio are constant and the company is currently operating at full capacity.
What is the external financing need if sales increase by 4 percent?
A) −$1,908
B) −$804
C) −$397
D) $1,201
E) $1,344