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Daniel Sawyer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and he wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.

Last year's sales = S0 $350 Last year's accounts payable $40
Sales growth rate = g 30% Last year's notes payable $50
Last year's total assets = A0* $580 Last year's accruals $30
Last year's profit margin = PM 5% Target payout ratio 60%
Select the correct answer.

A. $135.9 B. $143.9 C. $147.9 D. $139.9 E. $131.9

Respuesta :

Answer:

Option B. $143.9

Step-by-step explanation:

Last year data :

Sales = $350

Profit margin = 5%

Total assets = $580

Accounts payable = $40

Accruals = $30

Sales growth rate = 30%

Calculate total increase in total assets :

Increase in total assets = Total assets × Growth rate

                                       = 580  × 30%

                                       = $174

Calculate increase in spontaneous liabilities :

Increase in spontaneous liabilities = (40 + 30) × 30%

                                                         = $21

Calculate increase in retained dividend :

calculate the increase sales :

        increased sales = 350 × (1 + 0.30)

                                   = $455

calculate profit margin for next year on increase sales :

      Profit margin on increased sales = 455 × 5%

                                                             = $22.75

Calculate retained earning :

       Retained earning = profit - payout of profit

                                     = 22.75 - ( 22.75 × 60% )

                                     = 22.75 - 13.65

                                     = $9.10

Calculate AFN :

AFN = Increase in assets - Increase in liabilities - increase in retained earning

      = 174 - 21 - 9.10

      = $143.90

Option B. is the answer.

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