Quantitative Problem $1$: Beasley Industries' sales are expected to increase from $$5$ million in $2019$ to $$6$ million in $2020,$ or by $20\%.$ Its assets totaled $$2$ million at the end of $2019.$ Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of $2019,$ current liabilities are $$780,000,$ consisting of $$160,000$ of accounts payable, $$400,000$ of notes payable, and $$220,000$ 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. Do not round intermediate calculations. Round your answer to the nearest dollar. $

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 $=\frac{\text{A}\text{c}\text{t}\text{u}\text{a}\text{l}\text{s}\text{a}\text{l}\text{e}\text{s}}{\{\begin{array}{ccc}\text{:}[& \text{P}\text{e}\text{r}\text{c}\text{e}\text{n}\text{t}\text{a}\text{g}\text{e}of\text{c}\text{a}\text{p}\text{a}\text{c}\text{i}\text{t}\text{y}& ]\\ & at\text{w}\text{h}\text{i}\text{c}\text{h}\text{f}\text{l}\text{x}\text{e}\text{d}\text{a}\text{s}\text{e}\text{e}\text{t}\text{s}& \\ & \text{w}\text{e}\text{t}\text{e}\text{o}\text{p}\text{e}\text{r}\text{a}\text{t}\text{e}\text{d}& \end{array}}$

Next, management would calculate the firm's target fixed assets ratio as follows:

$\frac{\text{T}\text{o}\text{t}\text{a}\text{l}\text{f}\text{i}\text{x}\text{e}\text{d}\text{a}\text{s}\text{s}\text{e}\text{t}\text{s}}{\text{S}\text{a}\text{l}\text{e}\text{s}}=\frac{\text{A}\text{c}\text{t}\text{u}\text{a}\text{l}\text{f}\text{i}\text{x}\text{e}\text{d}\text{a}\text{s}\text{s}\text{e}\text{t}\text{s}}{\text{F}\text{u}\text{l}\text{l}\text{c}\text{a}\text{p}\text{s}\text{c}\text{i}\text{t}\text{y}\text{B}\text{a}\text{l}\text{o}\text{s}}$

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 $\frac{?}{?}$ Sales