Chua Chang & Wu Inc. is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
A) -$14,440
B) -$15,200
C) -$16,000
D) -$17,640

Question

Chua Chang & Wu Inc. is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? 
A) -$14,440 
B) -$15,200 
C) -$16,000 
D) -$17,640

Quizplus · Accepted Answer

AFN = (A*/S0)ΔS - (L*/S0)ΔS - MS1(RR) 
AFN = [(400/0.6)(0.4) - (200/0.6)(0.3) - (0.05)(500)] - (0.15)(400) 
AFN = (-$24,000) - ($60) 
AFN = -$16,000

Therefore, the AFN for the coming year is -$16,000. The best choice is C.