Calculating additional funds needed

Reference no: EM1366580

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 year just ended were $400, and fixed assets were used at 80% of capacity, but current assets were at optimal levels. Sales are expected to increase by 5% next year, the profit margin is 5%, and the dividend payout ratio is 60%. 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

Reference no: EM1366580

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