Question

AFN equation Broussard Skateboard's sales are expected to increase by 15% from $7.6 million in 2016 to $8.74 million in 2017. Its assets totaled $2 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 4%, and the forecasted payout ratio is 55%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations. $

Answer 1

Answer:

$7,680

Explanation:

Assets totaled ($2 million ×15%) $300,000

Less spontaneous liabilities affected by sales

($450,000 accounts payable+$450,000 accruals) ( $900,000×15%) ($135,000)

Less Sales increased

($8,740,000×0.04×0.45) $157,320

Addition funds needed $7,680

Or

AFN =

($2,000,000×15%-$900,000×15%×$8,740,000×0.04×0.45)

=$7,680

Therefore the forecast Broussard's additional funds needed for the coming year will be $7,680