4. The Additional Funds Needed (AFN) equation Cold Duck Manufacturing Inc. has the following end-of-year balance sheet: Cold Duck Manufacturing Inc. Balance Sheet For Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts payable $150,000 400,000 $250,000 150,000 Accounts receivable Accrued liabilities Inventories 350,000 Notes payable 100,000 Total Current Assets $900,000 Total Current Liabilities $500,000 Net Fixed Assets: Long-Term Bonds 1,000,000 $1,500,000 Net plant and equipment $2,100,000 Total Debt (cost minus depreciation) Common Equity Common stock 800,000 Retained earnings 700,000 Total Common Equity $1,500,000 Total Assets $3,000,000 Total Liabilities and Equity $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, Cold Duck Manufacturing Inc. 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 40%. Suppose Cold Duck's assets are fully utilized. Using the additional funds needed (AFN) equation, the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.'s expected sales is $ (Hint: Do not round intermediate calculations.) When 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 Cold Duck this year? (Hint: Do not round intermediate calculations.) O $60,000 O $54,000 O $72,000 O $66,000 Now, Cold Duck 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, Cold Duck's net profit margin and dividend payout ratio will be the same as this year's values, then Cold Duck is expected to generate of additional retained earnings financing. (Hint: Do not round intermediate calculations.) According to the financial forecasts for Cold Duck Manufacturing Inc. and the AFN equation, next year, the firm will need to raise in additional external financing. (Hint: Do not round intermediate calculations.)