1. Additional Funds Needed The Booth Company’s sales are forecasted to double from $1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet: Cash $ 100 Accounts payable $ 50 Accounts receivable 200 Notes payable 150 Inventories 200 Accruals 50 Net fixed assets 500 Long-term debt 400 Common stock 100 Retained earnings 250 Total assets $1000 Total liabilities and equity $1000 Booth’s fixed assets were used to only 50% of capacity during 2012, but its current assets were at their proper levels in relation to sales. Spontaneous liabilities and all assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth’s after-tax profit margin is forecasted to be 7% and its payout ratio to be 70%. What is Booth’s additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.$ 2. AFN equation Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, 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 6%, and the forecasted payout ratio is 55%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar. $ Assume that the company’s year-end 2013 assets had been $4 million. Is the company’s “capital intensity” ratio the same or different? I. The capital intensity ratio is measured as A0*/S0. Broussard’s capital intensity ratio is lower than that of the firm with $4 million year-end 2013 assets; therefore, Broussard is more capital intensive – it would require a smaller increase in total assets to support the increase in sales. II. The capital intensity ratio is measured as A0*/S0. Broussard’s capital intensity ratio is higher than that of the firm with $4 million year-end 2013 assets; therefore, Broussard is less capital intensive – it would require a smaller increase in total assets to support the increase in sales. III. The capital intensity ratio is measured as A0*/S0. Broussard’s capital intensity ratio is higher than that of the firm with $4 million year-end 2013 assets; therefore, Broussard is more capital intensive – it would require a larger increase in total assets to support the increase in sales. IV. The capital intensity ratio is measured as A0*/S0. Broussard’s capital intensity ratio is lower than that of the firm with $4 million year-end 2013 assets; therefore, Broussard is more capital intensive – it would require a larger increase in total assets to support the increase in sales. 3.AFN Equation Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $4 million at the end of 2013. Baxter is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, 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. $ Why is this AFN different from the one when the company pays dividends? I. Under this scenario the company would have a lower level of retained earnings which would reduce the amount of additional funds needed. II. Under this scenario the company would have a lower level of retained earnings but this would have no effect on the amount of additional funds needed. III. Under this scen…
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