Explore BrainMass

# Additional funds needed AFN for the coming year

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Clayton Industries is planning its operations for next year, and Ronnie Clayton, 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? 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 (to bank) \$50
Last year's total assets = A0 \$500 Last year's accruals \$30
Last year's profit margin = M 5% Target payout ratio 60%

a. \$102.8
b. \$108.2
c. \$113.9
d. \$119.9
e. \$125.9

#### Solution Preview

Increase in Assets= 500*30%=\$150

Increase in Notes payable= 50*30%=\$15

Increase in retained earnings= 350*1.3*5%-Dividend
=22.75-60%*22.75
=\$9.1

AFN= Increase in ...

#### Solution Summary

This provides the steps to calculate the AFN for the coming year

\$2.19