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18 July, 16:47

Last year Handorf-Zhu Inc. had $850 million of sales, and it had $425 million of fixed assets that were used at only 85% of capacity. What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

(A) 19.06%

(B) 18.88%

(C) 17.65%

(D) 16.94%

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Answers (1)
  1. 18 July, 18:26
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    (C) 17.65%

    Explanation:

    For computing the maximum sales growth rate, first we have to determine the full capacity sales which are shown below:

    = Sales value : capacity percentage

    = $850 million : 85%

    = $1,000 million

    Now the maximum sales growth rate would be

    = (Full capacity sales - actual sales) : (actual sales)

    = ($1,000 million - $850 million) : ($850 million)

    = $150 million : $850 million

    = 17.65%
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