com/ilrn/takeAssignment/takeAssignmentMain.do Assignment Score: 7600% ment: Chap

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com/ilrn/takeAssignment/takeAssignmentMain.do Assignment Score: 7600% ment: Chapter 17-Financial Planning and Forecasting Submit Assignment for Grading question 3 of 10. Save Exit ns Problem 17.05 Check My Work (a remaining) eBook Problem 17-9 Sales increase consisting of $200,000 of Pierce Furnishings generated $2 million in sales during 2012, and its year-end total assets were $1.6 milion. Also, at year-end 2012, current liabilities were $500,000, notes payable, $200,000 of accounts payable, and $100,000 of accrued abilties. Lookin in sales. Pierce's profit margin is 7%, and its retention ratio is 60% Ho large of a sales increase can the company achieve without ham g to raise funds eternaly? write e t your ans completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. g ahead to 2013, the company estimates that its assets must increase by $0.80 for every $1.00 increase er Check My Work (a remaining) Ore lcen Key Question 9 of t0 Preblem 179

Explanation / Answer

Here the AFN equation should be equal to 0
Ao ×S/so Lo ×S/so-(S1 × PM × b)
Ao = current level of assets
S/So = percentage increase in sales i.e. change in sales divided by current sales
Lo = current level of liabilities
S1 = new level of sales
PM = profit margin
b = retention rate = 1 – payout rate

Let "x" be % increase in sales
1.6x-0.2x-(2*(1+x)*0.07*0.6)=0

solving for x we get 6.383%. So the sales can go up to $2,127,660

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