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Problem 17-1:AFN EQUATION Carter Corporations sales are expected to increase from $5 million in 2008 to $6 million in 2009, or by 20%. Its assets totaled $3 million at the end of 2008. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2008, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 5%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast the additional funds Carter will need for the coming year.AFN EQUATION Refer to Problem 17-1.What additional funds would be needed if the companys year-end 2008 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 companys capital intensity the same or different? Explain.
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