Broussard Skateboard\'s sales are expected to increase by 25% from $8.6 million

Question

Broussard Skateboard's sales are expected to increase by 25% from $8.6 million in 2016 to $10.75 million in 2017. Its assets totaled $4 million at the end of 2016. Baxter 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 be 4%. Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Do not round intermediate calculations. Round your answer to the nearest dollar.

Explanation / Answer

AFN= Increase in Assets-Increase in Liabilities – Addition in R.E

= 1000000 - 225000 - 430000

= 345000

Sales Expected 10750000 After- Tax profit Margin 430000 Dividend Payments: 0 Addition to R.E. 430000 Increase in Assets: 1000000 Increase in Liabilities: 225000

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