Question

Broussard Skateboard's sales are expected to increase by 15% from $9.0 million in 2016 to $10.35 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 60%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.

Answer 1

		All amounts in milions
Particulars	Year 2016	Year 2017
Sales	9	10.35	-----A
After tax profit margin	5%	5%	-----B
PAT	0.45	0.5175	-----A*B
Payout	60%	60%
Retained earnings	40%	40%
Retained earnings amount	0.18	0.207	-------C
Particulars	Year 2016	Year 2017	Change from 2017 to 2016
Assets	5	5.75	0.75
Current Liabilities
Accounts payable	0.45	0.5175	0.0675
Notes Payable	0.5	0.575	0.075
Accruals	0.45	0.5175	0.0675	----- D
Net additional working capital required in 2017			0.54
Additional funds required in 2017			0.333	-----D-C

Final ans ---- Hence additonal funds required is .333 Mn dollars or 333,000 $