Broussard Skateboard's sales are expected to increase by 25%
from $8.8 million in 2015 to $11.00 million in 2016. Its assets
totaled $4 million at the end of 2015. Baxter is already at full
capacity, so its assets must grow at the same rate as projected
sales. At the end of 2015, 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%. Assume that the company pays no dividends.
Under these assumptions, what would be the additional funds needed
for the coming year? Do not round intermediate calculations. Round
your answer to the nearest dollar.
$
Why is this AFN different from the one when the company pays
dividends?
-Select-IIIIIIIVVItem 2
I. Under this scenario the company would have a
lower level of retained earnings which would reduce the amount of
additional funds needed.
II. Under this scenario the company would have a
lower level of retained earnings but this would have no effect on
the amount of additional funds needed.
III. Under this scenario the company would have a
higher level of retained earnings which would reduce the amount of
additional funds needed.
IV. Under this scenario the company would have a
higher level of retained earnings which would increase the amount
of additional funds needed.
V. Under this scenario the company would have a
higher level of retained earnings but this would have no effect on
the amount of additional funds needed.
Answer a.
2015:
Total Assets = $4,000,000
Spontaneous Current Liabilities = Accounts Payable +
Accruals
Spontaneous Current Liabilities = $450,000 + $450,000
Spontaneous Current Liabilities = $900,000
2016:
Growth Rate = 25%
Addition to Retained Earnings = Sales * Net Profit Margin
Addition to Retained Earnings = $11,000,000 * 5%
Addition to Retained Earnings = $550,000
Increase in Total Assets = Total Assets in 2015 * Growth
Rate
Increase in Total Assets = $4,000,000 * 25%
Increase in Total Assets = $1,000,000
Increase in Spontaneous Current Liabilities = Spontaneous
Current Liabilities in 2015 * Growth Rate
Increase in Spontaneous Current Liabilities = $900,000 * 25%
Increase in Spontaneous Current Liabilities = $225,000
Additional Funds Needed = Increase in Total Assets - Increase in
Spontaneous Current Liabilities - Addition to Retained
Earnings
Additional Funds Needed = $1,000,000 - $225,000 - $550,000
Additional Funds Needed = $225,000
Answer b.
Under this scenario the company would have a higher level of retained earnings which would reduce the amount of additional funds needed.
Broussard Skateboard's sales are expected to increase by 25% from $8.8 million in 2015 to $11.00...
Broussard Skateboard's sales are expected to increase by 20% from $7.6 million in 2015 to $9.12 million in 2016. Its assets totaled $5 million at the end of 2015. Baxter is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2015, 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 6%....
Problem 9-3 AFN Equation Broussard Skateboard's sales are
expected to increase by 15% from $7.0 million in 2015 to $8.05
million in 2016. Its assets totaled $5 million at the end of 2015.
Baxter is already at full capacity, so its assets must grow at the
same rate as projected sales. At the end of 2015, 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...
Broussard Skateboard's sales are expected to increase by 25% from $7.6 million in 2018 to $9.50 million in 2019. Its assets totaled $3 million at the end of 2018. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2018, 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 3%....
AFN Equation Broussard Skateboard's sales are expected to increase by 15% from $7.0 million in 2016 to $8.05 million in 2017. Its assets totaled $4 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...
AFN Equation Broussard Skateboard's sales are expected to increase by 20% from $7.2 million in 2016 to $8.64 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...
AFN equation Broussard Skateboard's sales are expected to increase by 25% from $9.0 million in 2016 to $11.25 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets m. 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 75%. What...
AFN equation Broussard Skateboard's sales are expected to
increase by 25% from $8.8 million in 2015 to $11.00 million in
2016. Its assets totaled $4 million at the end of 2015. Broussard
is already at full capacity, so its assets must grow at the same
rate as projected sales. At the end of 2015, 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...
Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $4 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 6%. Assume that...
Broussard Skateboard's sales are expected to increase by 25% from $8.8 million in 2016 to $11.00 million in 2017. Its assets totaled $4 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 6%,...
Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $2 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 4%. a. Assume...