Question

Your firm recorded sales for the most recent year of $10 million generated from an asset...

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 firm’s 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 = ??

Homework Answers

Answer #1

g = growth rate of sales =20% =0.2 (Given)

S0 = current sales = 10,000,000 = 10 Million

S1 = new sales = S0 * (1+g) = 10,000,000*(1+0.2) = 12,000,000 = 12 Million

A0 = current asset = 7,000,000 = 7 Million

NI0 = current profit = 500,000

NI0 / S0 = current profit margin = 500,000/10,000,000 = 0.05=5%

RR0 = Retention ratio = 1 - Dividend / Net profit = 1 - 200,000/500,000 = 0.6 = 60%

Change of Assets = A0 * g= 7,000,000* 0.2 =1,400,000

Change of Liability = 200,000

Addition to Retained Earnings = S1 * (NI0 / S0) * RR0 = 12,000,000*(500,000/10,000,000)*0.6 = 360,000

AFN = Change of Assets - Change of Liabilities - Addition to Retained Earnings = 1,400,000 -200,000 -360,000 = 840,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your firm recorded sales for the most recent year of $10 million generated from an asset...
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. Current year accounts payable and accrued liabilities provided spontaneously generated funds of $200,000. Sales are projected to grow at 20%. 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 firm’s AFN?        $200,000        $600,000       ...
Muscat Video Products’ sales are expected to increase from OMR (8) million in 2019 to OMR...
Muscat Video Products’ sales are expected to increase from OMR (8) million in 2019 to OMR (10) million in 2020. Asset turnover generated in the 2019 of (2) times. Muscat Company is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were OMR (2) million, the net profit was OMR (32) thousand, and the dividend payout ratio was 30%. Suppose the net profit margin and dividend...
Quantitative Problem 1: Beasley Industries' sales are expected to increase from $5 million in 2017 to...
Quantitative Problem 1: Beasley Industries' sales are expected to increase from $5 million in 2017 to $6 million in 2018, or by 20%. Its assets totaled $3 million at the end of 2017. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2017, current liabilities are $800,000, consisting of $170,000 of accounts payable, $350,000 of notes payable, and $280,000 of accrued liabilities. Its profit margin is forecasted to be 4%,...
Blackwell Automotive’s balance sheet at the end of its most recent fiscal year shows the following...
Blackwell Automotive’s balance sheet at the end of its most recent fiscal year shows the following information: Flying Roos Corporation Balance Sheet as of December 31, 2014 Assets: Liabilities and Equity: Cash and marketable sec. $23,015 Accounts payable and accruals $163,257 Accounts receivable $141,258 Notes payable $21,115 Inventories $212,444 Total current liabilities $184,372 Total current assets $387,940 Long-term debt $168,022 Total liabilities $352,394 Net plant and equipment $711,256 Common stock $313,299 Goodwill and other assets $78,656 Retained earnings $512,159 Total...
Sandhill Automotive’s balance sheet at the end of its most recent fiscal year shows the following...
Sandhill Automotive’s balance sheet at the end of its most recent fiscal year shows the following information: Sandhill Automotive Balance Sheet as of March 31, 2017 Assets: Liabilities and Equity: Cash and marketable sec. $38,000 Accounts payable and accruals $163,000 Accounts receivable 166,000 Notes payable 28,000 Inventory 227,000 Total current assets $431,000 Total current liabilities $191,000 Long-term debt 166,000 Total liabilities $357,000 Net plant and equipment 710,000 Common stock 310,000 Goodwill and other assets 99,000 Retained earnings 573,000 Total assets...
AFN equation Broussard Skateboard's sales are expected to increase by 15% from $7.4 million in 2016...
AFN equation Broussard Skateboard's sales are expected to increase by 15% from $7.4 million in 2016 to $8.51 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to...
Edwards Industries’ sales are expected to increase from $5 million in 2016 to $6 million in...
Edwards Industries’ sales are expected to increase from $5 million in 2016 to $6 million in 2017, and its assets totaled $3 million at the end of 2016. Also, at year-end 2016, current liabilities were $800,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $400,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.60 for every $1.00 increase in sales. Paladin’s retention ratio is 40%. If the firm does...
Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in...
Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in 2020, or by 20%. Its assets totaled $6 million at the end of 2019. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2019, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 5%, and the...
Edwards Industries’ sales are expected to increase from $5 million in 2016 to $6 million in...
Edwards Industries’ sales are expected to increase from $5 million in 2016 to $6 million in 2017, and its assets totaled $3 million at the end of 2016. Also, at year-end 2016, current liabilities were $800,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $400,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.60 for every $1.00 increase in sales. Paladin’s retention ratio is 40%. If the firm does...
Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in...
Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in 2020, or by 20%. Its assets totaled $3 million at the end of 2019. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2019, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 5%. Assume that...