Hey, can you please solve this :) Thanks! Fuzzy Button Clothing Company reported
ID: 2738064 • Letter: H
Question
Hey, can you please solve this :) Thanks!
Fuzzy Button Clothing Company reported sales of $775,000 at the end of last year; but this year, sales are expected to grow by 10%. Fuzzy Button Clothing Company expects to maintain its current profit margin of 20% and dividend payout ratio of 30%. The firm's total assets equaled $400,000 and were operated at full capacity. Fuzzy Button Clothing Company's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $45,000, and accrued liabilities of $70,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? O -$106,203 -$87,733 O O -$101,585 O -$92,350 A negatively assigned AFN (Additional Funds Needed) value represents: O A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth O A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends O A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirementsExplanation / Answer
Details Amt $ Current Year Sales =S= 775,000 Sales Increase =delS= 77,500 Profit margin =m= 20% Dividend payout ratio=d= 30% Total Assets =A= 400,000 Spontaneous liability=(current liab+accrued liabilities)=S= 130,000 A/S= 0.51613 L/S= 0.16774 S1=S+delS= 852,500 AFN=A/S*delS-L/S*delS-m*S1*(1-d) =0.51613*77500-0.16774*77500-0.20*0.70*852500= = (92,350) So Additional Funds needed =-$92,350 A negatively assigned AFN value represents A surplus of internally generated fund that can be invested in physical or financial assets or paid out as additional dividends. Assume at retention level R the AFN = So , 0.51613*77500-0.16774*77500-0.20*R*852500=0 R=15.8% So required dividend payout ratio=84.2%