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2. The Additional Funds Needed (AFN) equation Bohemian Manufacturing Company has the following end-of-year balance sheet: $250,000 Bohemian Manufacturing Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents $150,000 Accounts payable Accounts receivable 400,000 Accrued liabilities Inventories 350,000 Notes payable Total Current Assets $900,000 Total Current Liabilities Net Fixed Assets: Long-Term Bonds Net plant and equipment $2,100,000 Total Debt (cost minus depreciation) Common Equity Common stock Retained earnings Total Common Equity Total Assets $3,000,000 Total Liabilities and Equity 150,000 100,000 $500,000 1,000,000 $1,500,000 800,000 700,000 $1,500,000 $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, Bohemian Manufacturing Company generated $300,000 net income on sales of $13,000,000. The firm expects sales to increase by 17% this coming year and also expects to maintain its long-run dividend payout ratio of 45%. Suppose Bohemian Manufacturing 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 Bohemian Manufacturing Company's expected sales. O $586,500 612,000 O $535,500 O $510,000 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 Bohemian Manufacturing Company this year? O $81,600 $68,000 O $78,200 O $71,400 In addition, Bohemian Manufacturing 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. from operations that will be added Given the preceding information, Bohemian Manufacturing Company is expected to generate to retained earnings. According to the AFN equation and projections for Bohemian Manufacturing Company, the firm's AFN is