Task: A firm has the following balance sheet:
Cash $20
Accounts receivable $20
Inventory $20
Common stock $80
Accounts payable $20
Notes payable $40
Long-term debt $80
Fixed assets $180
Total assets $240
Retained earnings $20
Total liabilities and equity $240
Sales for the year just ended were $400, and fixed assets were used at 80 percent of capacity, but its current assets were at optimal levels. Sales are expected to grow by 5 percent next year, the profit margin is 5 percent, and the dividend payout ratio is 60 percent. How much additional funds (AFN) will be needed?
a. $4.6
b. -$6.4 (surplus)
c. $2.4
d. -$4.6 (surplus)
e. $0.8