Attempts $$ Keep the Highest $1/2$

$2.$ Problem $16\mathrm{.}02$

Click here to read the eBook: The AFN Equation

AFN EQUATION

Carlsbad Corporation's sales are expected to increase from $$5$ million in $2016$ to $$6$ million in $2017,$ or by $20\%.$ Its assets totaled $$5$ million at the end of $2016.$ Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of $2016,$ current liabilities are $$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 $7\%,$ and the forecasted retention ratio is $45\%.$ Use the AFN equation to forecast Carlsbad's additional funds needed for the coming year. Write out your answer completely. For example, $5$ million should be entered as $5,000,000.$ Round your answer to the nearest cent.

$

Now assume the company's assets totaled $$3$ million at the end of $2016.$ Is the company's "capital intensity" the same or different comparing to initial situation?