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    Using the AFN Equation to Calculate the AFN for the Coming Year

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    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%

    a. -$14,440
    b. -$15,200
    c. -$16,000
    d. -$16,800
    e. -$17,640

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    Solution Preview

    Increase in Assets= 135000*40%=$54000

    Increase in Accounts payable= ...

    Solution Summary

    This solution applies the formula in a quick, concise manner with all calculations displayed.