2. The Additional Funds Needed (AFN) equation Aa Aa E Fuzzy Button Clothing Company has the following end-of-year balance sheet: Assets Current Assets: Cash and equivalents Accounts receivable Inventories Total Current Assets Fuzzy Button Clothing Company Balance Sheet For the Year Ended on December 31 Liabilities Current Liabilities: $150,000 Accounts payable 400,000 Accrued liabilities 350,000 Notes payable $900,000 Total Current Liabilities $250,000 150,000 100,000 $500,000 Net Fixed Assets: Net plant and equipment (cost minus depreciation) Long-Term Bonds Total Debt 1,000,000 $1,500,000 $2,100,000 Common Equity Common stock Retained earnings Total Common Equity Total Liabilities and Equity 800,000 700,000 $1,500,000 $3,000,000 Total Assets $3,000,000 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 $300,000 net income on sales of $13,500,000. The firm expects sales to increase by 16% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose Fuzzy Button's assets are fully utilized. Usingthe additional funds needed (AFN) equation, the increase in total assets that is necessary to support Fuzzy Button Clothing Company's expected sales is 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 this year? $64,000 O $60,800 $73,600 O $67,200 Now, Fuzzy Button expects to generate a positive net income next year, and to distribute some of its earnings as dividends. It will retain the remainder of the firm's forecasted net income (as retained earnings) for future asset investment. As the company generates more internal funding, it will have less to raise externally via the capital markets. Assuming that, next year, Fuzzy Button's net profit margin and dividend payout ratio will be the same as this year's values, then Fuzzy Button is expected to generate $ of additional retained earnings financing. According to the financial forecasts for Fuzzy Button Clothing Company and the AFN equation, next year, the firm will need to raise in additional external financing