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Broussard Skateboard's sales are expected to increase by 15% from $8.8 million in 2018 to $10.12 million in 2019. Its assets totaled $3 million at the end of 2018. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2018, 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 3%, and the forecasted payout ratio is 65%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.

Sagot :

abiolataiwo2015

Answer:

$208,740

Explanation:

Calculation to determine additional funds needed for the coming year Using the AFN equation

AFN= Increase in Assets-Increase in Liabilities – Addition in Retained Earnings

Let plug in the formula

AFN=($3 million*15%)-($450,000+$450,000*15%)-[$10.12 million *3%*(100%-65%)]

AFN=($3 million*15%)-(900,000*15)-($10.12 million *3%*35)

AFN=$450,000-$135,000-$106,260

AFN=$208,740

Therefore the additional funds needed for the coming year will be $208,740

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