In 1998, hepler company's sales were $26 million and its total assets were $10 current liabilities were $4 million and total equity was $2 million. hepler company's sales for 1999 are forecasted to be $34 million, earnings after taxes are expected to be 5 percent of sales and dividends of $800,000 are expected to be paid. assuming that the ratios "assets to sales" and "current liabilities to sales" in 1998 remain the same in 1999, determine the amount of additional financing required.

AFN  $946,154

Explanation:

To forecast the additional funds needed it's necessary to apply the following equation:

AFN = A0 + S1/S0 - L0 x S1/S0 - S1 x PM x b

Where :

A0 = Current Level of Assets

S1/S0 = Percentage Increase in sales

L0 = Current Level of Liabilities

S1 = New Level of Sales

PM = Profit Margin

b= Retention rate = 1 - payout rate

Final Value

AFN = A0(10,000,000) + S1/S0(0,31) - L0(4,000,000)

x S1/S0(0,31) - S1(34,000,000) x PM (0,05) x b (0,53) = $946,154

We need to calculate some values as Earning After Taxes:

5% of Sales = 5% x $34,000,000 = $1,700,000

Payout RATIO = Dividends/Net Income = $800,000/$1,700,000= 47%

Retention Ratio= 0,53

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

d. to get countries or companies to stop doing something objectionable.