Last year National Aeronautics had a FA/Sales ratio of 40%, comprised of $250 million of sales and $100 million of fixed assets. However, its fixed assets were used at only 90% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set? Select the correct answer.   a. 34.3%     b. 36.0%     c. 37.7%     d. 32.6%     e. 30.9%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Last year National Aeronautics had a FA/Sales ratio of 40%, comprised of $250 million of sales and $100 million of fixed assets. However, its fixed assets were used at only 90% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set?

Select the correct answer.

  a. 34.3%  
  b. 36.0%  
  c. 37.7%  
  d. 32.6%  
  e. 30.9%
Expert Solution
Given:

Here,

Fixed Assets is $100 million

Total Sales is $250 million

Current FA/Sales Ratio is 40%

Operating Capacity of Fixed Asset is 90%

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