What is the maximum increase in sales that can be sustained

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Reference no: EM13481383

The most recent financial statement for Throwing Copper Co. are shown here:

Income Statement

Balance Sheet

Sales

$42,000

Current assets

$21,000

Long-term debt

$51,000

Costs

28,500

Fixed assets

86,000

Equity

56,000

Taxable income

$13,500

Total

$107,000

Total

$107,000

Taxes (34%)

4,590





Net income

$8,910





Assets and costs are proportional to sales. The company maintains a constant 30 percent dividend payout ratio and a constant debt-equity ratio.

Required:

What is the maximum increase in sales that can be sustained assuming no new equity is issued?

  1. $5,364.03
  2. $5,164.03
  3. $2,105.24
  4. $5264.03
  5. $2,599.70

Reference no: EM13481383

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