A firm has a net income of $8 on sales of $40 with total assets of $90 including fixed assets of $75

Finance Mar 08, 2021

A firm has a net income of $8 on sales of $40 with total assets of $90 including fixed assets of $75. Having a retention ratio of 50 percent, if the firm is now operating at 80 percent capacity, what are the maximum sales at full capacity?

Expert Solution

Computation of Maximum Sales at Full Capacity:

Given,

Sales at 80% Capacity $40

Maximum Sales at Full Capacity = $40/80% = $50

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