Given the Following Information: Current Assets = $400; fiXed Assets

question 14

Multiple Choice

Given the following information: current assets = $400; fixed assets = $500; accounts payable = $100; notes payable = $45; long-term debt = $455; equity = $300; sales = $450; costs = $400; tax
Rate = 34%. Suppose that current assets, costs, and accounts payable maintain a constant ratio to
Sales. If the firm is producing at 80% capacity, what is the total external financing needed if sales
Increase 25%? Assume the firm pays no dividends.

• A) $33.75
• B) $66.25
• C) $143.75
• D) $172.50
• E) $380.25

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Definitions:

Copper Mines

Sites or locations where copper ore is extracted from the earth for commercial value and industrial use.

Global Recession

A period of worldwide economic decline characterized by reduced industrial production, trade, and consumer spending.

Constant Returns

A situation in production where increasing all inputs by a certain proportion results in an increase in outputs by the same proportion.

Isoquants

Curves on a graph that represent combinations of factors of production that yield the same level of output.