what is the maximum increase in sales that can be sustained assuming no new equity i 556285

Sales and Growth

The most recent financial statements for Tool Co. are shown here:

Income Statement

Balance Sheet

Sales

$46,000

Net working capital

$ 21,000

Long term debt

$ 60,000

Costs

30,400

Fixed assets

100,000

Equity

61,000

Taxable income

$15,600

Total

$121,000

Total

$121,000

Taxes (34%)

5,304

Net income

$10,296

Assets and costs are proportional to sales. Tool Co. maintains a constant 30 percent dividend payout ratio and a constant debt equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued?

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