Cloud 9\'s salCLOUD 9 sales were $500,000 during 2005, and its year-end assets w
ID: 2707812 • Letter: C
Question
Cloud 9's salCLOUD 9 sales were $500,000 during 2005, and its year-end assets were $400,000. For 2006, sales are expected to grow by 5%,and since the firm is operating at full capacity, its assets must grow in proportion to sales. Its 2005 current liabilities consisted of $60,000 of accounts payable, $20,000 of notes payable, and $50,000 of accruals. Its after-tax profit margin is forecasted to be 15%, and the firm plans to pay out 20% of its earnings. Based on the AFN equation, what is the firm's additional funds needed (AFN) for 2006?
a.
-$21,000
b.
-$28,500
c.
-$36,500
d.
-$41,000
e.
-$48,500
a.
-$21,000
b.
-$28,500
c.
-$36,500
d.
-$41,000
e.
-$48,500
Explanation / Answer
c.
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