Question

The balance sheet data below pertain to American Pulp and Paper for the recent year ended. In addition, sales were $60 million. For the coming year, management believes that sales will increase by 20% to a total of $72 million. The profit margin is expected to be 5%, and the dividend payout ratio is targeted at 40%. No excess capacity exists. Determine the additional funds needed (AFN) in millions of dollars for the coming year using Additional Funds Needed (AFN) Equation Method.

Answer 1

Answer:

$0.24 million

Explanation:

Calculation to Determine the additional funds needed (AFN) in millions of dollars for the coming year using Additional Funds Needed (AFN) Equation Method

Additional Funds Needed (AFN) =[ (14/60)(12) - (2/60)(12)]- (0.05)(72)(.6)

Additional Funds Needed (AFN) = ($2.8 - 0.4) -$2.16

Additional Funds Needed (AFN) =$0.24 million

Therefore the additional funds needed (AFN) in millions of dollars for the coming year using Additional Funds Needed (AFN) Equation Method is $0.24 milion