AFN equation
Broussard Skateboard's sales are expected to increase by 25%from $7.6 million in 2016 to $9.50 million in 2017. Its assetstotaled $4 million at the end of 2016. Broussard is already at fullcapacity, so its assets must grow at the same rate as projectedsales. At the end of 2016, current liabilities were $1.4 million,consisting of $450,000 of accounts payable, $500,000 of notespayable, and $450,000 of accruals. The after-tax profit margin isforecasted to be 4%, and the forecasted payout ratio is 60%. Whatwould be the additional funds needed? Do not round intermediatecalculations. Round your answer to the nearest dollar.
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Assume that an otherwise identical firm had $5 million in totalassets at the end of 2016. The identical firm's capital intensityratio (A0*/S0) is -Select-higher thanlowerthanequal toItem 2Â Â than Broussard's; therefore, theidentical firm is -Select-lessmorethe sameItem 3 capital intensive- it would require -Select-a smallera largerthe sameItem4Â Â increase in total assets to support the increase insales.
