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| Subject:
Corporate Finance - How to answer a Additional Funds Needed Question?
Category: Business and Money > Finance Asked by: ricoq-ga List Price: $10.00 |
Posted:
24 Apr 2005 08:48 PDT
Expires: 26 Apr 2005 17:12 PDT Question ID: 513489 |
Suppose that a firm is operating at full capacity and plans to increase its sales by 20% next year. If the firm currently has $16,000,000 in assets, $8,000,000 in spontaneous liabilities, expects to earn $900,000 next year, and maintains a payout ration of .4, what is the forecasted Additional Funds Needed (i.e. 1st pass AFN) according to the proportional or "formula method"? |
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| Subject:
Re: Corporate Finance - How to answer a Additional Funds Needed Question?
From: nh786-ga on 25 Apr 2005 06:43 PDT |
Net assets = 16 Mill - 8 Mill = 8 Mill Increae in sales = 20% Proportional Increase in net assets = 8 Mill * 20% = 1.6 Mill Net years Net proofit (after tax) = 900 K Pay out = 40% of 900 K = 360,000 Balance retained earnings = 540,000 Additional funds needed = 1.6 Mill - 540 K = 1,060,000 |
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