Compuvac Company has just completed its first-year forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt that can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will reduce by $160,000 under the second year than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in additional funds needed (AFN) for Compuvac from the first year to the second pass?
A. $0
B. $160,000
C. $240,000
D. $320,000
E. $480,000
Answer: E
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