Quantitative Problem 1: Beasley Industries' sales are expected increase from $4 million in 2015 to $5 million in 2016, or by 25%. Its assets totaled $3 million at the end of 2015. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2015, current liabilities are $750,000, consisting of $150,000 of accounts payable, $500,000 of notes payable, and $100,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 70%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations. 2169 Hide Feedback Incorrect Check My Work Feedback Refer to the AFN equation and substitute known values into this equation. Calculate AS in the AFN equation as the difference in next year's and the current year's sales. Be careful to not include the notes payable amount in the spontaneously generated funds calculations required in the AFN equation. Remember to use next year's sales level in calculating the increase the retained earnings component of the AFN equation. Be careful of the mathematical order of operations. The AFN equation assumes that ratios remain constant. However, firms are not always operating at full capacity so adjustments need to be made to the existing asset forecast. Excess capacity adjustments are changes made to the existing asset forecast because the firm is not operating at full capacity. For example, a firm may not be at full capacity with respect to its fixed assets. First, the firm's management must find out the firm's full capacity sales as follows: Full capacity sales = Actual saks Percentage of capacity at which fixed assets were operated Next, management would calculate the firm's target fixed assets ratio as follows: Tocat fixed assets Actuat fixed assets Sales Pull capacity sales Finally, management would use the target fixed assets ratio with the projected sales to calculate the firm's required level of fixed assets as follows: Required level of fixed assets = (Target fixed assets/Sales) x Projected sales Quantitative Problem 2: Mitchell Manufacturing Company has $1,900,000,000 in sales and $290,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity. a. What level of sales could Mitchell have obtained if it had been operating at full capacity? Round your answer to the nearest dollar. Do not round intermediate calculations. $ 253333333 b. What is Mitchell's Target fixed assets/Sales ratio? Round your answer to two decimal places. Do not round intermediate calculations. 65.51 % C. If Mitchell's sales increase by 45%, how large of an increase in fixed assets will the company need to meet its Target fixed assets/Sales ratio? Round your answer to the nearest dollar. Do not round intermediate calculations. $ 136,458,00 *
