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Carlsbad Corporation's sales are expected to increase from $5 million in 2019 to $6 million in 2020, or by 20%. Its assets totaled $4 million at the end of 2019. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2019, 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 4%, and the forecasted retention ratio is 25%. Use the AFN equation to forecast the additional funds Carlsbad will need 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 dollar.

Now assume the company's assets totaled $3 million at the end of 2019. Is the company's "capital intensity" the same or different comparing to initial situation?

Assume that the company pays no dividends. Use the AFN equation to forecast the additional funds Carlsbad will need 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 dollar.

Why is this AFN different from the one when the company pays dividends?

1. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed.
2. Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed.
3. Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.
4. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.
5. Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.

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