In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecas
ID: 2726458 • Letter: I
Question
In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's additional funds needed (AFN) for next year. The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
Select the correct answer.
Last year's sales = S0 $200,000 Last year's accounts payable $50,000 Sales growth rate = g 40% Last year's notes payable $15,000 Last year's total assets = A0* $165,000 Last year's accruals $20,000 Last year's profit margin = PM 20.0% Target payout ratio 25.0%Explanation / Answer
Correct option is (E)
AFN = (A/S0)S–(L/S0)S–MS1(RR) A- Assets tied directly to sales L-spontaneous liabilities that are affected by sales S0 the previous year's sales S1 total projected sales for next year S the change in sales between S0 and S1 MS1 projected net income RR the retention ratio from net income AFN $ (4,000.00) (165000/200000)*200000*40%-((50000+20000)/200000)*200000*40%-200000*140%*20%*(1-25%)