Herb I. Vore Hydroponics Corporation wishes to achieve a 35 percent increase in sales next year. Sales

Question:

Herb I. Vore Hydroponics wishes to achieve a 35 percent increase in sales next year. Sales last year were $30 million, and the company has equity capital of $12 million. It intends to raise $0.5 million in new equity by the sale of to officers. No is planned. Tentatively, the company has set the following target ratios: assets to sales, 0.67; net profit margin, 0.08; and debt to equity, 0.60. The company has determined that these ratios are not sufficient to produce a growth in sales of 35 percent.
a. Holding the other two target ratios constant, what assets-to-sales ratio would be necessary to attain the 35 percent sales increase?
b. Holding the other two ratios constant, what net profit margin would be necessary?
c. Holding the other two ratios constant, what debt-to-equity ratio would be necessary?
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