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Broussard Skateboard's sales are expected to increase by 15% from $8.4 million in 2018 to $9.66...

Broussard Skateboard's sales are expected to increase by 15% from $8.4 million in 2018 to $9.66 million in 2019. Its assets totaled $5 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 5%. Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Do not round intermediate calculations. Round your answer to the nearest dollar.

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Expert Solution

AFN = Increase in assets - increase in spontaneous liabilities - addition to retained earnings

= ($5,000,000 * 15%) - (($450,000 + $450,000) * 15%) - ($9,660,000 * 5%)

= $750,000 - $135,000 - $483,000

= $132,000

Additional fund needed (AFN) = $132,000

jeff jeffy answered 2 years ago
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