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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

AFN EQUATION Refer to problem 17-1. What additional funds would be needed if the company's year-end 2018 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in problem 17-1? Is the company's "capital intensity" the same or different? Explain.

Summary Introduction

To Determine: The additional funds needed for Corporation C at the end of 2018 and whether the capital intensity of the company is similar or different.

Introduction: AFN is abbreviated as additional funds needed, is the measure of cash an organization must raise from outer sources to back the expansion in assets necessary to help expanded level of sales. It is additionally called as external financing needed (EFN).

Explanation

Determine the additional funds needed for Corporation C at the end of 2018

AFN=[(A0*S0)×ΔS(L0*S0)×ΔS(M×S1×RR)]=[($4,000,000$5,000,000)×$1,000,000($500,000$5,000,000)×$1,000,000(3%×$6,000,000×30%)]=[(0.8×$1,000,000)(0

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