Bayek Corporations was $7 million in 2020 and it was expected to grow by 25% in 2021. Its assets totaled $4.5 million at the end of 2020. Bayek is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2020, current liabilities are $1.25 million, consisting of $400,000 of accounts payable, $500,000 of notes payable, and $350,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and the forecasted retention ratio is 25%. Use the AFN equation to forecast the additional funds Bayek will need for the coming year.

a. Refer to Problem 1. What additional funds would be needed if the companys year-end 2020 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in Problem 1? Is the comspanys capital intensity the same or different? Explain.

b.Refer to Question 1 and assume that the company had $4.5 million in assets at the end of 2021. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in Question 1?