Question
The Booth Company's sales are forecasted to double from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021, balance sheet: Cash
The Booth Company's sales are forecasted to double from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021, 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 | $1,000 | Total liabilities and equity | $1,000 |
Booth's fixed assets were used to only 50% of capacity during 2021, 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 6% and its payout ratio to be 35%. What is Booth's additional funds needed (AFN) for the coming year? Hint: Forecast next year's financial statements. Forecast fixed assets taking into account the current year's capacity level and assuming you'd use up this excess capacity before adding fixed assets. Round your answer to the nearest dollar.
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