The most recent financial statements for Alexander Co. are shown here: Balance S
ID: 2813550 • Letter: T
Question
The most recent financial statements for Alexander Co. are shown here: Balance Sheet Income Statement Sales Costs $43,250 Current assets 17740 Long-term debt 35,650 Fixed assets 68,450 Equity 49,020 $ 7,600 Total $86190 Total $86,190 ncome Taxes (23%) 1.748 Net income 5,852 Assets and costs are proportional to sales. The company maintains a constant 45 percent dividend payout ratio and a constant debt-equity ratio What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum dollar increaseExplanation / Answer
Maximum dollar increase:
= Sales×Sustainable growth rate
= $43,250×(ROE × b) / [1 – (ROE × b)]
= $43,250×(($5,852/$49,020)×(1-45%))/[1–(($5,852/$49,020)×(1-45%))]
= $3,039.31
Hence, correct option is $3,039.31