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Problem 12-01 AFN equation Broussard Skateboard's sales are expected to increase by 15% from $7.2 million in 2016...

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Finance

Problem 12-01
AFN equation

Broussard Skateboard's sales are expected to increase by 15%from $7.2 million in 2016 to $8.28 million in 2017. Its assetstotaled $3 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 7%, and the forecasted payout ratio is 75%. Usethe AFN equation to forecast Broussard's additional funds neededfor the coming year. Round your answer to the nearest dollar. Donot round intermediate calculations.

Answer & Explanation Solved by verified expert
3.7 Ratings (308 Votes)
Additional Funds Needed AFN for the coming year Expected Next Year Sales 8280000 After Tax profit Margin After Tax profit Margin Expected Next Year Sales x Profit Margin 8280000 x 7 579600    See Answer
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Problem 12-01AFN equationBroussard Skateboard's sales are expected to increase by 15%from $7.2 million in 2016 to $8.28 million in 2017. Its assetstotaled $3 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 7%, and the forecasted payout ratio is 75%. Usethe AFN equation to forecast Broussard's additional funds neededfor the coming year. Round your answer to the nearest dollar. Donot round intermediate calculations.

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