Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 12-6 Additional Funds Needed The Booth Company's sales are forecasted to double from $1,000 in 2016 to $2,000 in 2017. Here is the December

Problem 12-6

Additional Funds Needed

The Booth Company's sales are forecasted to double from $1,000 in 2016 to $2,000 in 2017. Here is the December 31, 2016, 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

$1000

Total liabilities and equity

$1000

Booth's fixed assets were used to only 50% of capacity during 2016, 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 4% and its payout ratio to be 45%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Dark Side Of Valuation

Authors: Aswath Damodaran

2nd Edition

0137126891, 9780137126897

More Books

Students also viewed these Finance questions