1. Water and Power Co. (W&P) currently has $540,000 in total assets and sales of $1,820,000. Half of W&P’s total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 21% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is:

a) 113,400

b) 124,740

c) 136,080

d) 147,420

2. W&P was using its fixed assets at only 94.00% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets?

a) $1,645,745

b) $1,742,553

c) $1,839,362

d) $1,936,170

3. When you consider that W&P’s fixed assets were being underused, its target fixed assets to sales ratio should be:

a)11.160%

b) 12.555%

c)13.950%

d) 16.740%

4. When you consider that W&P’s fixed assets were being underutilized, W&P must raise _____________   in additional fixed assets to support its expected sales next year.

a)31,533

b)33,388

c)35,243

d)37,098