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carter corp

# carter corp - the forecasted retention ration is 30 Use the...

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Carter Corp's sales are expected to increase from \$5 million n 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. The after-tax profit margin is forecasted to be 5% and
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Unformatted text preview: the forecasted retention ration is 30%. Use the AFN equation to forecast Carter's additional funds needed for the coming year. AFN = (A*/S ) ∆ S – (L*/S ) ∆ S – MS 1 (RR) = \$5,000,000 \$3,000,000 \$1,000,000 – \$5,000,000 \$500,000 \$1,000,000 – 0.05(\$6,000,000)(0.3) = (0.6)(\$1,000,000) – (0.1)(\$1,000,000) – (\$300,000)(0.3) = \$600,000 – \$100,000 – \$90,000 = \$410,000....
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