Your firm recorded sales for the most recent year of $10 million generated from an asset base of $7 million, producing a $500,000 net income. Sales are projected to grow at 20%, causing spontaneous liabilities to increase by $200,000. In the most recent year, $200,000 was paid out as dividends, and the current payout ratio will continue in the upcoming years. What is your firms AFN?

Hint:

g = growth rate of sales = ??

S0 = current sales = ??

S1 = new sales = S0 * (1+g) = ??

A0 = current asset = ??

NI0 = current profit = ??

NI0 / S0 = current profit margin = ??

RR0 = Retention ratio = 1 - Dividend / Net profit = ??

Change of Assets = A0 * g= ??

Change of Liability = ??

Addition to Retained Earnings = S1 * (NI0 / S0) * RR0 = ??

AFN = Change of Assets - Change of Liabilities - Addition to Retained Earnings = ??