Refer to Problem 17-1 and assume that the company had $3 million in assets at the end of 2021. However, now assume that the company pays no dividends.

Under these assumptions, what additional funds would be needed for the coming year?

Why is this AFN different from the one you found in Problem 17-1?

Problem 17-1

Carlsbad Corporation’s sales are expected to increase from $5 million in 2021 to $6 million in 2022, or by 20%. Its assets totaled $3 million at the end of 2021.
Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2021, 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 3%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year.