More on the AFN (Additional Funds Needed) equation Cold Duck Manufacturing Inc. reported sales of $720,000 at the end of

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More on the AFN (Additional Funds Needed)equation
Cold Duck Manufacturing Inc. reported sales of $720,000 at theend of last year; but this year, sales are expected to grow by 7%.Cold Duckexpects to maintain its current profit margin of 23% anddividend payout ratio of 30%. The firm’s total assets equaled$500,000 and were operated at full capacity. Cold Duck’s balancesheet shows the following current liabilities: accounts payable of$65,000, notes payable of $30,000, and accrued liabilities of$60,000. Based on the AFN (Additional Funds Needed) equation, whatis the firm’s AFN for the coming year? (select the correctoption)
a. -$127,119
b. -$92,895
c. -$117,341
d. -$97,784
A negatively-signed AFN value represents: (selectthe correct option)
a. a point at which the funds generated within the firm equalthe demands for funds to finance the firm’s future expected salesrequirements.
b. a shortage of internally generated funds that must be raisedoutside the company to finance the company’s forecasted futuregrowth.
c. a surplus of internally generated funds that can be investedin physical or financial assets or paid out as additionaldividends.
Because of its excess funds, Cold Duck is thinking about raisingits dividend payout ratio to satisfy shareholders. What percentageof its earnings can Cold Duck pay to shareholders without needingto raise any external capital? (Hint: What can Cold Duck increaseits dividend payout ratio to before the AFN becomespositive?) (select the correct option)
a. 63.9%
b. 76.7%
c. 72.4%
d. 85.2%