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1. The AFN equation Aa Green Caterpillar Garden Supplies Inc. has the following end-of-year balance sheet: Green Caterpillar Garden Supplies Inc. Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $150,000 Accounts payable Accounts receivable 400,000 Accrued liabilities Inventories 350,000 Notes payable Total Current Assets $900,000 Total Current Liabilities Net Fixed Assets: Long-Term Bonds Net plant and equipment $2,100,000 Total Debt (cost minus depreciation) Common Equity Common stock Retained earnings Total Common Equity Total Assets $3,000,000 Total Liabilities and Equity $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 800,000 700,000 $1,500,000 $3,000,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Green Caterpillar Garden Supplies Inc. generated $300,000 net income on sales of $13,000,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Green Caterpillar Garden Supplies Inc.'s assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Green Caterpillar Garden Supplies Inc.'s expected sales. O $513,000 $540,000 O $621,000 O $594,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Green Caterpillar Garden Supplies Inc. this year? O $72,000 O $86,400 O $75,600 O $64,800

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