Chua Chang & Wu Inc. is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
Last year's sales = S0 $200,000
Last year's accounts payable $50,000
Sales growth rate = g 40%
Last year's notes payable (to bank) $15,000
Last year's total assets = A0 $135,000
Last year's accruals $20,000
Last year's profit margin = M 20.0%
Target payout ratio 25.0%
AFN = Increase in assets - increase in spontaneous liabilities - retained earnings
Increase in assets = ...
The solution explains how to calculate the additional funds needed (AFN)