I only have enough credit for one more question. I am aware that the rule states
ID: 2789996 • Letter: I
Question
I only have enough credit for one more question. I am aware that the rule states you only need to solve a limit of 5 answers. However, in this case there are people who are willing to help answer all of them. If you are one of them, please kindly help me answer all of these questions. Please don't just answer the first question or the five questions, otherwise I'll hit the dislike button. Thank you
1. Factors that affect the AFN equation Aa Aa Several factors affect a firm's need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm's need for external capital-that is, its AFN (additional funds needed). Check all that apply The firm's inventory turnover decreases, with no effect on the sales forecast. The firm increases its dividend payout ratio. The firm previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. Dividends to common shareholders are paid out of after-tax earnings. Do these payouts affect a firm's AFN? O Yes, dividends still affect a firm's AFN even though they are paid out of after-tax earnings. O No, dividends do not affect a firm's AFN, because they are paid out of after-tax earningsExplanation / Answer
1) FACTORS THAT AFFECT THE AFN EQUATION: The firm's inventory turnover decreases, with no effect on the sales forecast. / The firm increases its dividend payout ratio / 2) Yes, dividends still affect a firm's AFN eventhough they are paid out of after tax earnings. 3) COLD DUCK MFG INC: a) Increase in total assets = 3000000*16% = $ 480,000 b) Increase in total assets supplied by spontaneous liabilities = (250000+150000)*16% = $ 64,000 c) Addition to retained earnings = Forecast sales * profit margin * retention ratio = 14,000,000*1.16*(300000/14000000)*(1-0.40) = $ 208,800 d) According to the AFN equation and projections for Cold Duck Mfg Inc , the firm's AFN = 480000-64000-208800 = $ 207,200 4) BLUE ELK MANUFACTURING: a) AFN = 475000*6%-145000*6%-775000*1.06*21%*75% = $ (109,586) b) A positively signed AFN value represents: *A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth.