Problem:
The most recent financial statements for Throwing Copper Co. are shown here: Income Statement Balance Sheet Sales $50,000 Current assets $78,300 Long-term debt $54,000 Costs 32,000 Fixed assets 43,200 Equity 67,500 Taxable income $18,000 Total $121,500 Total $121,500 Taxes (35%) 6,300 Net income $11,700 Assets and costs are proportional to sales. The company maintains a constant 16 percent dividend payout ratio and a constant debt?equity ratio.
Required:
Question: What is the maximum increase in sales that can be sustained assuming no new equity is issued?
Note: Show supporting computations in good form.