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    Calculations for AFN

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    XYW Company has the following December 31st balance sheet:

    ($000)

    Cash $ 41 A/P $ 335
    A/R 160 Accruals 150
    Inventory 450 Long-term Debt 246
    Net Fixed Assets 650 Common Equity 570
    Total liabilities
    Total assets $ 1301 and equity $ 1301

    XYW Company last year sales were $1,500; it operated at 80% of capacity. Sales are expected to increase by 28% this year and Business Choice net profit margin is projected at 9.53%, with 42% of Net Income paid as dividends to its common shareholders.

    1) Use the formula method to calculate A-O's AFN.

    2) Use AFN formula =(A/S)(S1-S0) - (L/S)(S1-S0) -MS1(1-d)

    3) Prepare a pro-forma balance sheet after the sales expansion and new AFN

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    Solution Preview

    XYW Company has the following December 31st balance sheet:

    ($000)

    Cash $ 41 A/P $ 335
    A/R 160 Accruals 150
    Inventory 450 Long-term Debt 246
    Net Fixed Assets 650 Common Equity 570
    Total liabilities
    Total assets $ 1301 and equity $ 1301

    XYW Company last year sales were $1,500; it operated at 80% of capacity. Sales are expected to increase by 28% this year and Business Choice net profit margin is projected at 9.53%, with 42% of Net Income paid as dividends to its common shareholders.

    1) Use the formula method to calculate A-O's AFN.
    There ...

    Solution Summary

    This solution provides calculations for AFN.

    $2.19

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