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Calculations for AFN

See attached file for detailed problem and requirements.

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

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