3. The Additional Funds Needed (AFN) equation Bohemian Manufacturing Company has the following end-of-year balance sheet: Bohemian Manufacturing Company Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Labilities: Cash and equivalents $150,000 Accounts payable Accounts recelvable Accrued liabilities 400,000 350,000 Notes payable $250,000 150,000 100,000 $500,000 1,000,000 $900,000 Inventories Total Current Assets Net Fixed Assets: Net plant and equipment (cost minus depreciation) Total Current abilities Long-Term Bonds Total Debt $2,100,000 $1,500,000 Common Equity Common stock 800,000 Retained earnings Total Common Equity Total Liabilities and Equity 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, Bohemian Manufacturing Company generated $500,000 net income on sale of 14,000,000. The firm expects sales to increase by 15% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose BMC's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the Increase in total assets that is necessary to support a firm's expected sales, it is projected that BMC will require In additional assets 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 BMC this year $63,000 Retained earnings 700,000 $1,500,000 Total Common Equity Total Liabilities and Equity Total Assets $3,000,000 $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 $500,000 net income on sales of $14,000,000. The firm expects sales to increase by 15% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose BMC's assets are fully utilized. Using the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support a firm's expected sales, it is projected that BMC will require In additional assets. $405,000 When a firm grows, some liabilities grow spontaneously along with sa heous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of $472,500 rease in assets will be supplied by spontaneous liabilities for BMC this year? $450,000 O $63,000 $427,500 $57,000 O $54,000 0 $60,000 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 to its existing retained earnings. Given the preceding information, BMC expects to generate 5 (Hint: Round your answer to the nearest whole dollar.) Ascording to the AFN equation and projections for Bohemian Manufacturing Company, the firm's AFN is 3
