Broussard Skateboard\'s sales are expected to increase by 25% from $9.0 million

Question

Broussard Skateboard's sales are expected to increase by 25% from $9.0 million in 2016 to $11.25 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 be 4%, and the forecasted payout ratio is 55%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.

Explanation / Answer

2016 2017 Sales (in million) 9000000.00 11250000 Assets (in million) 5000000.00 6250000 After tax profit (@ 4% of sales) 360000 450000 Dividend Payout 198000 247500 Addition to Retained Earnings 162000 202500 Increase in Assets 1250000.00 Less: Addition in Retained Earnings 202500.00 Less: Increase in current liabilities (only AP & accruals) @ 25% growth 225000.00 AFN 822500.00

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