Edit View History Bookmarks Window Help 00 Sun 900 newconnec

Edit View History Bookmarks Window Help ??00 Sun 9:00 newconnect.mheducation.com 600 B001 Sum 18: Resources Connect blems Saved Help Save & ExitSubmit m Company has a ratio of long-term debt to long-term debt plus equity of 39 and a current ratio of 17. Current liabilities are $950, sales are $6,370, profit margin is 9.8 percent, and ROE is 20 percent. What is the amount of the firm\'s net fixed assets? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.32.16.) Net fixed assets

Solution

1)Current ratio =current asset /current liabilities

1.7 =CA /950

CA (current asset) = 1.7 *950 = $ 1615

2)Net Income =sales * profit margin

         = 6370*.098

         = 624.26

ROE =Net income /equity

.20 = 624.26 /equity

equity = 624.26 /.20

    = 3121.30

3)Let Long term debt be \"X\"

x /[x+3121.30] = .39

x = .39 [x+3121.30]

x = .39x + 1217.31

x -.39x = 1217.31

.61x = 1217.31

   x = 1217.31/.61

      = 1995.59

Long term debt - 1995.59

Total Liabilities and equity = 950 current liability + 1995.59 long term +3121.30 equity

         = 6066.89

current asset +net fixed asset = Total Liabilities and equity

1615 + NFA = 6066.89

NFA = 6066.89- 1615

         = 4451.89

Net fixed asset = 4451.89