Last year Emery Industries had $450 million of sales and $225 million of fixed assets,so its Fixed Assets/Sales ratio was 50%.However,its fixed assets were used at only 65% of capacity.If the company had been able to sell off enough of its fixed assets at book value so that it was operating at full capacity,with sales held constant at $450 million,how much cash (in millions)would it have generated?
A)$74.81
B)$78.75
C)$82.69
D)$86.82
E)$91.16

Question

Quizplus · Accepted Answer

If the fixed assets were used at 65% capacity, the full capacity sales would be $450 million / 0.65 = $692.31 million. The fixed assets needed for full capacity sales of $692.31 million would be $225 million (current fixed assets) * 0.65 = $146.25 million. Therefore, the excess fixed assets that could be sold off are $225 million - $146.25 million = $78.75 million.

Last Year Emery Industries Had $450 Million of Sales and $225