Question

Use the following to answer questions 17-18:

Banana Inc's balance sheet as of December 31, 2014, is shown below (millions of dollars):

Cash	$ 3.5		Accounts Payable	$9.0
Accounts Receivable	26.0		Notes Payable	18.0
Inventories	58.0		Accruals	8.5
Total Current Assets	87.5		Total Current Liabilities	35.5
Net Fixed Assets	35.0		Long-term Debt	6.0
			Common Stock	15.0
			Retained Earnings	66.0
Total Assets	$122.5		Total Liabilities and Equity	$122.5

Sales for 2014 were $280 million, while net income for the year was $10.5 million. Banana Inc. paid dividends of $4.2 million to common shareholders. Assume that all ratios remain constant.

17.	Suppose the firm was operating at full capacity. Total assets, accounts payable, and accruals increase at the same percentage of sales. If sales are projected to increase by 25%, what will be the projected Additional Funds Needed (AFN) for Year 2015?
A)	$20.169 million
B)	$13.515 million
C)	$15.607 million
D)	$18.375 million
E)	$19.778 million

18.	Suppose the firm was operating at 90% capacity in Year 2014, what is the firm's full capacity sales?
A)	$382.37 million
B)	$361.87 million
C)	$311.11 million
D)	$280.00 million
E)	$297.23 milllion

Answer 1