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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 and assume that the company had $3 million in assets at the end of 2018. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in problem 17-1?

Summary Introduction

To Determine: The additional funds needed for Corporation C for the coming year and the reasons on why the additional funds needed (AFN) is different from problem 17-1.

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 for the coming year

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%×$6,000,000×1)]=[(0.8×$1,000,000)(0

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