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Carlsbad Corporation's sales are expected to increase from $$5$ million in $2021$ to $$6$ million in $2022,$ or by $20\%.$ Its assets totaled $$4$ million at the end of $2021.$ Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of $2021,$ current liabilities are $$1$ million, consisting of $$250,000$ of accounts payable, $$500,000$ of notes payable, and $$250,000$ of accrued liabilities. Its profit margin is forecasted to be $5\%.$

Assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carlsbad will need 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 dollar.

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Why is this AFN different from the one when the company pays dividends?

Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed.

Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.

Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.

Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.

Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed.