Question

In: Finance

A pro forma statement indicates that both sales and fixed assets are projected to increase by...

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7 percent over their current levels. Given this, you can safely assume that the firm:

a. is projected to grow at the internal rate of growth.
b. is projected to grow at the sustainable rate of growth.
c. currently has excess capacity.
d. is currently operating at full capacity.
e. retains all of its net income.

Solutions

Expert Solution

Ans- Option D. is currently operating at full capacity.

Since the Sales and Fixed Assets are expected to increase at the same rate over there current levels, it means that the Fixed assets is operating at full capacity and to compensate for the increase in Sales from current Level, Fixed asset also has to be increased


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