Question
Additional Funds Needed The Booth Company's sales are forecasted to double from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021,
Additional Funds Needed
The Booth Company's sales are forecasted to double from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021, balance sheet:
Cash $ 100
Accounts payable $ 50
Accounts receivable 200
Notes payable 150
Inventories 200
Accruals 50
Net fixed assets 500
Long-term debt 400
Common stock 100
Retained earnings 250
Total assets $1,000
Total liabilities and equity $1,000
Booth's fixed assets were used to only 50% of capacity during 2021, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 8% and its payout ratio to be 40%. What is Booth's additional funds needed (AFN) for the coming year? Hint: Forecast next year's financial statements. Forecast fixed assets taking into account the current year's capacity level and assuming you'd use up this excess capacity before adding fixed assets. Round your answer to the nearest dollar. $
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