Question: Rose Stone Capital Inc. Balance Sheet Notes Payable Long-term Debt $ 150 $ 350 Cash $ 50 Inventory $ 125 Other Net Current Assets $

Rose Stone Capital Inc. Balance Sheet Notes Payable Long-term Debt $ 150 $ 350 Cash $ 50 Inventory $ 125 Other Net Current Assets $ 75 Net Fixed Assets $ 650 Equity $ 400 Total Assets $ 900 Total Debt & Equity $ 900 Rose Stone Capital Inc. Income Statement Sales Costs Earnings Before Taxes Taxes (34%) Net Income $1,200 $ 900 $ 300 $ 102 $ 198

Refer to the financial statements for Rose Stone Capital Inc., found in the image above. Suppose that the firm retains 30% of net income, but does not raise any other equity capital. Assume that assets and costs vary directly with sales, but other accounts do not. The tax rate is constant. If the firm wishes to maintain a constant debt-equity ratio,

what is the maximum dollar increase in sales that the firm can achieve?

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