Lisette works for Southwest Petroleum Corp. Her company is responsible for every aspect of setting up a refinery location for it
1 answer:
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Answer:
Cash Generated = 78.75 millions dollars
so correct option is c. $78.75
Explanation:
given data
sales = $450 million
fixed assets = $225 million
Fixed Assets/Sales ratio = 50%
capacity utilized = 65%
to find out
how much cash would it have generated
solution
we find here Sales at full capacity that is express as
Sales at full capacity =
Sales at full capacity =
Sales at full capacity = 692.31 millions dollars
so
target fixed assets is =
target fixed assets is =
target fixed assets is = 32.50 %
and
Optimal fixed assets = sales × target fixed assets
Optimal fixed assets = 450 × 32.50
Optimal fixed assets = $146.25
so Cash Generated is here as
Cash Generated = Actual fixed assets - Optimal fixed assets
Cash Generated = $225 - $146.25
Cash Generated = 78.75 millions dollars
so correct option is c. $78.75