How much additional capital must the company raise

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Brown & Sons recently reported sales of $100 million, and net income equal to $5 million. The company has $70 million in total assets. Over the next year, the company is forecasting a 20% increase in sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company also estimates that if sales increase 20%, spontaneous liabilities will increase by $2 million. If the company’s sales increase, its profit margin will remain at its current level. The company’s dividend payout ratio is 40%. Based on the AFN formula, how much additional capital must the company raise in order to support the 20% increase in sales?

a. $2,000,000

b. $6,000,000

c. $8,400,000

d. $9,600,000

e. $14,000,000

Reference no: EM131597252

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