Comparative income statements and balance sheets for Merck ($millions) follow:

Required
a. Use the following ratios to prepare a projected income statement, balance sheet, and statement of cash flows for Year 3.
Sales growth...............................................................................18.27%
Gross profit margin .......................................................................3927%
Selling, general, and administrative expense/Sales...................................13.69%
Depriciation expense/Prior-year property, plant and equipment (gross)......... 8.76%
Interest expense/Prior-year long-term debt.............................................4.94%
Income tax expense/Pretax income....................................................30.00%
Accounts receivable turnover (Sales/Accounts receivable).............................9.15
Inventory turnover (Cost of goods sold/Inventory).....................................8.10
Accounts payable turnover (Cost of goods sold/Accounts payable)..................4.91
Taxes payable/Tax expense.............................................................50.41%
Total assets/Stockholders equity (financial leverage)....................................235
Dividends per share........................................................................$106
Capital expenditures/Sales...............................................................9.04%
b. Based on your initial projections, how much external financing (long- term debt and / or stockholder's equity) will Merck need to fund its growth at projected increases in sales?

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Year 2 Year 1 Income Statement Net sales Cost of goods Gross profit Selling, general and administrative expense Depreciation and amortization expense Interest expense Income before tax Income tax expense Net income Outstanding shares Balance Sheet Cash $47,716$40,343 28,977 22 444 18,739 17,899 6,531 6,469 1,464 1,277 342 329 10,402 9,824 3,121 3,002 $7,282 S 6,822 2,976 2968 $ 3,287 $4,255 5,215 5,262 3,579 3,022 880 1,059 12,961 13,598 18,956 16,707 5,853 5,225 13,103 11,482 17,942 15,075 $44,006$40,155 S 5,904 $ 5,391 Short-term debt and current maturities of long-term debt 4,067 3,319 Inventories Other current assets Total current assets Property, plant, and equipment Net property, plant, and equipment Other noncurrent assets Total assets Accounts payable and accrued liabilities Income taxes payable 1,573 1,244 11,544 9,954 Year 2 Year 1 Total current liabilities Deferred income taxes and other liabilities Long-term debt Total noncurrent liabilities Common stock 11,614 11,768 4,799 3601 16,413 15,369 30 30 Capital surplus Retained eamings Treasury stodk Shareholders' equity Total liabilities and equity 6,907 6,266 1,500 27,395 (22,387) (18,858) 16,050 14,833 $44,007S40,154