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Alter Bridge Mfg., Inc., is currently operating at only 91 percent of fixed asset capacity. Current...

Alter Bridge Mfg., Inc., is currently operating at only 91 percent of fixed asset capacity. Current sales are $716932. Fixed assets are $483606 and sales are projected to grow to $1091416. How much in new fixed assets are required to support this growth in sales?

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Answer #1

Present sales

$716,932.00

Full capacity sales ($716,932/91%)

$787,837.36

Fixed assets

$483,606.00

Capital intensity ratio = Fixed assets/ full capacity sales
($483,606/787,837)

$0.61

Fixed assets required = sales after growth* capital intensity ratio-present fixed assets ($1,091,416*0.61)-$483,606

$186,348.68

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