Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. The Additional Funds Needed (AFN) equation Fuzzy Button Clothing Company has the following end-of-year balance sheet: 31 The firm is currently in the process

image text in transcribedimage text in transcribed 1. The Additional Funds Needed (AFN) equation Fuzzy Button Clothing Company has the following end-of-year balance sheet: 31 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Fuzzy Button Clothing Company generated $500,000 net income on sales of $12,500,000. The firm expects sales to increase by 19% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Fuzzy Button Clothing Company's assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Fuzzy Button Clothing Company's expected sales. (Note: Do not round intermediate calculations.) $627,000 $570,000 $655,500 $513,000 and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Fuzzy Button Clothing Company's assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Fuzzy Button Clothing Company's expected sales. (Note: Do not round intermediate calculations.) $627,000 $570,000 $655,500 $513,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Fuzzy Button Clothing Company this year? (Note: Do not round intermediate calculations.) $83,600 $76,000 $68,400 $87,400 In addition, Fuzzy Button Clothing Company is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Fuzzy Button Clothing Company is expected to generate \$ retained earnings. (Note: Do not round intermediate calculations.) from operations that will be added to from operations that will be added to (Note: Do not round intermediate calculations.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Inside Company Valuation

Authors: Angelo Corelli

1st Edition

3319537822, 9783319537825

More Books

Students also viewed these Finance questions