AFN Equation- Due to a change in demand for its products, Microdot Ltd is expecting to expand hugely in the year starting today. Up until now, fixed assets have only been utilised at 80 percent of total capacity. Therefore the chief financial officer needs to determine what additional funds Microdot Ltd will need to raise by the end of the current year. Microdot's sales, last year, were $95 million and the expected growth rate for sales in the current year is 45 percent. All sales are credit sales, Microdot Ltd's net profit margin is 8 percent, and 40 percent of net profit after tax (NPAT or NI) will be paid out as a dividend. Microdot Ltd faces, in the coming year, two severe restrictions on its flexibility: the company's debt ratio must not exceed 55% and the current ratio may not fall below 2.- The balance sheet Microdot Ltd for the year that ended this morning is: Cash Accounts Receiviable Inventory Current Assets 5,000,000 19,000,000 17,000,000 41,000,000 Fixed Assets Accumulated Depreciation Net fixed Assets 40,000,000 3,000,000 37,000,000 Total Assets 78,000,000 Accounts Payable Notes Payable Accrued Wages etc Current Liabilities 10,000,000 2,000,000 8,000,000 20,000,000 20,000,000 Long term debt Total Liabilities 40,000,000 Ordinary shares Retained Eamings Total Equities 22,500,000 15,500,000 38,000,000 Total Liabilities and OE 78,000,000 Required: Please note that you are NOT required to create or work with a pro-forma balance sheet. Instead, please use the AFN equation method (employing the standard simplifying assumptions concerning fixed assets) to answer the following: (a) With respect to the fact that fixed assets are currently being utilised at 75 percent of capacity, compute the values of A* and L*4 (3 marks) (b) Calculate any figures relating to Fixed Assets required for bringing this lumpy asset into the AFN equation (2 marks) (c) (d) Use the AFN equation to calculate any additional funds needed by the end of the year. (8 marks) What will be the figure for Total Assets in the pro-forma balance sheet for the coming year? [Note: You are NOT required to furnish this balance sheet!]" (2 marks) Given that Microdot Ltd prefers to take on short-term debt first, and issuing new equity is its least-favoured source of funding, calculate the value of funds that will have to be raised from each of these sources: t (1) Long-term Debt Short-term Debt (ii) The issue of new shares. Due to a change in demand for its products, Barramundi Ltd is expecting to expand hugely in the year starting today. Up until now, fixed assets have only been utilised at 80 percent of total capacity. Therefore the chief financial officer needs to determine what additional funds Barramundi Ltd will need to raise by the end of the current year. Barramundi's sales, last year, were $90 million and the expected growth rate for sales in the current year is 50 percent. All sales are credit sales, Barramundi Ltd's net profit margin is 8 percent, and 40 percent of net profit after tax (NPAT or NI) will be paid out as a dividend. Barraumundi Ltd faces, in the coming year, two severe restrictions on its flexibility: the company's debt ratio must not exceed 60% and the current ratio may not fall below 1.5. The balance sheet Barramundi Ltd for the year that ended this morning is: Cash Accounts Receiviable Inventory Current Assets 7,000,000 21,000,000 19,000,000 47,000,000 Fixed Assets Accumulated Depreciation Net fixed Assets 42,000,000 3,000,000 39,000,000 Total Assets 86,000,000 Accounts Payable Notes Payable Accrued Wages etc Current Liabilities 12,000,000 4,000,000 10,000,000 26,000,000 22,000,000 Long term debt Total Liabilities 48,000,000 Ordinary shares Retained Eamings Total Equities 22,500,000 15,500,000 38,000,000 Total Liabilities and OE 86,000,000 Required: Please note that you are NOT required to create or work with a pro-forma balance sheet. Instead, please use the AFN equation method (employing the standard simplifying assumptions concerning fixed assets) to answer the following: (a) With respect to the fact that fixed assets are currently being utilised at 80 percent of capacity, compute the values of A* and L* (3 marks) (b) Calculate any figures relating to Fixed Assets required for bringing this lumpy asset into the AFN equation (2 marks) (c) (d) Use the AFN equation to calculate any additional funds needed by the end of the year. (6 marks) What will be the figure for Total Assets in the pro-forma balance sheet for the coming year? [Note: You are NOT required to furnish this balance sheet!] (2 marks) (e) Given that Barramundi Ltd prefers to take on short-term debt first, and issuing new equity is its least-favoured source of funding, calculate the value of funds that will have to be raised from each of these sources: (i) (ii) (ii) Long-term Debt! Short-term Debt! The issue of new shares. (6 marks) Imagine now that Barramundi's 50% expansion in sales occurs over a three-year period rather than in just one year. Assuming the growth is equally spread over the three years and the profit margin and dividend payout ratios remain as stated above, what is the AFN projection for this four-year period? (6 marks)