Question

AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $7.4 million in 2016 to $8.88 million in 2017. Its assets totaled $5 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

Given,

Sales expected (2017) = $ 8.88 million or $ 8880000

Assets = $ 5 million or $ 5000000

Accounts payable = $ 450000

Accruals = $ 450000

After-tax profit margin = 4%

Payout ratio = 55%

Growth rate = 20%

Solution :-