Question

The Arkham Company has a ratio of long-term debt to long-term debt plus equity of .43 and a current ratio of 1.5. Current liabilities are $990, sales are $6,410, profit margin is 9.3 percent, and ROE is 20.4 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 =

neither of these are the answer  5362.74, 3,683.75, 5378.53

Answer 1

Fixed Assets $ 4,631.68

Working:

Calculation of fixed assets with given details is series of calculation which are linked with each other.
So, fixed assets is calculated as under:
Current Assets		=	Current Liabilities x Current ratio
		=	$           990	x	1.5
		=	$       1,485
Net Income		=	Sales x Profit Margin
		=	$       6,410	x	9.3%
		=	$     596.13
Equity		=	Net Income / ROE
		=	$     596.13	/	20.40%
		=	$ 2,922.21
Suppose long term debt is "x"
and,
D	Long term debt
E	Equity
Now,
D/(D+E)	=	0.43
D/(D+2922.21)	=	0.43
D	=	0.43D+1256.55
0.57D	=	1256.55
D	=	2,204.47
So,
Current Laibilities			990
Long term liabilities			2,204.47
Total Debt			3,194.47
As per balance sheet equiation,
Total Assets	=	Total Debt + Total Equity
	=	3,194.47	+	2,922.21
	=	6,116.68
Fixed Assets	=	Total Assets		-	Current Assets
	=	6,116.68		-	$    1,485
	=	4,631.68