6-3: The AFN Equation

AFN equation

Carter Corporation's sales are expected to increase from $5 million in 2014 to $6 million in 2015, or by 20%. Its assets totaled $5 million at the end of 2014. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2014, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. The after-tax profit margin is forecasted to be 3%, and the forecasted retention ratio is 40%. Use the AFN equation to forecast Carter's additional funds needed for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.

$