Suppose that Barone Corporation's sales are expected to increase from $5 million this year (year 0) to $6 million next year (year 1). Its assetstotaled $2,500,000 in year 0. Barone is at full capacity, so its assets must grow in proportion to projected sales.At the end of year 0, current liabilities are $800,000, consisting of $200,000 of accounts payable, $400,000 of notes payable, and $200,000 ofaccrued liabilities.Barone's profit margin is forecasted to be 3.00% and the forecasted retention ratio is 25.00%. Barone seeks to forecast the additional fundsneeded using the AFN equation.Let A represent Barone's assets and So represent sales in year 0. Let AS represent the change in sales in from year 0 to year 1.According to the video, which of the following best represents the projected increase in assets as part of the AFN equation?-AS+ AS× AS× SoUsing the formula from the video, the projected increase in assets, as part of the AFN equation, is

To calculate the additional funds needed (AFN) using the AFN equation, we need to determine the…

Answered: Suppose that Barone Corporation's sales…

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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Suppose that Psy Ops Industries currently has the balance sheet shown below, and that sales for the year just ended were $4.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.4 million next year. Assets Current $1,980,000 Current liabilities Long-term debt Equity assets Fixed assets 3,700,000 Liabilities and Equity Total assets $5,680,000 Total liabilities and equity $ 1,672,000 1,800,000 2,208,000 $ $5,680,000 If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Psy Ops need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.) Additional funds needed
Carlsbad Corporation's sales are expected to increase from $5 million in 2021 to $6 million in 2022, or by 20%. Its assets totaled $3 million at the end of 2021. Carlsbad is at full capacity, so its assets 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 7%, and the forecasted retention ratio is 45%. 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. $ What additional funds would be needed if the company's year - end 2021 assets had been $4 million? Assume that all other numbers are the same. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar. $…
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Derry Corporation is expected to have an EBIT of $3,400,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $155,000, and $195,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $17,500,000 in debt and 1,350,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company's WACC is 9.1 percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
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