Assume that Helaron,Inc.has sales of $83 million and fixed assets of $22.4 million.The corporation utilizes the percent-of-sales method of financial forecasting.If Helaron is expected to generate sales of $94 million next year,what will the firm's investment in fixed assets be?
A)$19.8 million
B)$28.8 million
C)$16.2 million
D)$25.4 million
E)None of the above

Question

Quizplus · Accepted Answer

The percent-of-sales method of financial forecasting assumes that a certain percentage of sales will be invested in fixed assets. To calculate the investment in fixed assets, we can use the following formula:Investment in fixed assets = Sales * Fixed asset percentageThe fixed asset percentage is calculated by dividing the current fixed assets by the current sales:Fixed asset percentage = Fixed assets / Sales= $22.4 million / $83 million= 0.27Using this percentage, we can calculate the investment in fixed assets for next year:Investment in fixed assets = $94 million * 0.27= $25.4 millionTherefore, the correct answer is D) $25.4 million.

Assume That Helaron,Inc