Purchase Solution

# How to Calculate Additional Funds Needed (AFN)

Not what you're looking for?

Baxter Video Production's sales are expected to increase from \$5 million in 2007 to \$6 million by 2008 or by 20%. Its assets totaled \$3 million at the end of 2007. Baxter is at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2007, current liabilities \$1 million, consisting of \$250,000 of accounts payable, \$500,000 of notes payable, and \$250,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter's additional funds needed for the the upcoming year.

##### Solution Summary

Baxter Video Production's sales are expected to increase from \$5 million in 2007 to \$6 million by 2008 or by 20%. Its assets totaled \$3 million at the end of 2007. Baxter is at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2007, current liabilities \$1 million, consisting of \$250,000 of accounts payable, \$500,000 of notes payable, and \$250,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter's additional funds needed for the the upcoming year.

##### Free BrainMass Quizzes

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.