1.AFN EQUATION Carlsbad Corporation s sales are expected to increase from $5 million in2016 to $6 million in 2017, or by 20%. Its assets totaled $3 million at the end of 2016.Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At theend 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 forecastedto be 3%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast theadditional funds Carlsbad will need for the coming year.

2.SALES INCREASE Paladin Furnishings generated$4 million in sales during 2016,and its year-endtotal assets were $3.2 million. Also, at year-end 2016, current liabilities were $500,000,consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities.Looking ahead to 2017,the company estimates that its assets must increase by $0.80 for every $1.00 increasein sales. Paladin s profit margin is 3%, and its retention ratio is 50%.How large of a sales increase can the company achieve without having to raise funds externally?