Back to Assignment Attempts 3. Problem 17.03 (AFN Equation) EG eBook Keep the Highest / 10 Carlsbad Corporation's sales are expected to increase from $5 million in 2021 to $6 million in 2022, or by 20%. Its assets totaled $2 million at the end of 2021. Carlsbad is at full capacity, so its asset must grow in proportion to projected sales. At the end of 2021, 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 3%. $ a. Assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar. b. Why is this AFN different from the one when the company pays dividends? I. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed. II. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed. III. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed. IV. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed. V. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed. -Select- Grade it Now Save & Continue Continue without saving
Back to Assignment Attempts 3. Problem 17.03 (AFN Equation) EG eBook Keep the Highest / 10 Carlsbad Corporation's sales are expected to increase from $5 million in 2021 to $6 million in 2022, or by 20%. Its assets totaled $2 million at the end of 2021. Carlsbad is at full capacity, so its asset must grow in proportion to projected sales. At the end of 2021, 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 3%. $ a. Assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar. b. Why is this AFN different from the one when the company pays dividends? I. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed. II. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed. III. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed. IV. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed. V. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed. -Select- Grade it Now Save & Continue Continue without saving
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3. Problem 17.03 (AFN Equation)
EG
eBook
Keep the Highest / 10
Carlsbad Corporation's sales are expected to increase from $5 million in 2021 to $6 million in 2022, or by 20%. Its assets totaled $2 million at the end of 2021. Carlsbad is at full
capacity, so its asset must grow in proportion to projected sales. At the end of 2021, 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 3%.
$
a. Assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year. Write out your answer
completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.
b. Why is this AFN different from the one when the company pays dividends?
I. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed.
II. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed.
III. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.
IV. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.
V. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.
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