Krogh Lumber's 2012 financial statements are shown here.

a. Assume that the company was operating at full capacity in 2012 with regard to all items except fixed assets; fixed assets in 2012 were being utilized to only 75% of capacity. By what percentage could 2013 sales increase over 2012 sales without the need for an increase in fixed assets?
b. Now suppose 2013 sales increase by 25% over 2012 sales. Assume that Krogh cannot sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its Operating costs/Sales ratio to 82% and increase its debt-to-assets ratio to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2013 total debt as notes payable, and it will issue bonds for the remainder. Its before-tax cost of debt is 11%. Any stock issuances or repurchases will be made at the firm's current stock price of $40. Develop Krogh's projected financial statements like those shown in Table 17.2. What are the balances of notes payable, bonds, common stock, and retained earnings?

Table 17.2

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Krogh Lumber: Balance Sheet as of December 31, 2012 (Thousands of Dollars) $ 1,800 10,800 Cash Receivables Inventories Total current assets Accounts payable Notes payable Accrued liabilitie s Total curent liabilities Mortgage bonds Common stock Retained earnings 7,200 3,472 $25,200 21,600 46800 Tota labilities and equity $13,192 5,000 2,000 26,608 Net fixed assets Total assets Krogh Lumber: Income Statement for December 31, 2012 (Thousands of Dollars) Sales Operating costs including depreciation Earnings before interest and taxes Interest Earnings before taxes Taxes (40%) Net income $36,000 30,783 $ 5,217 4,200 Dividends (60%) Addition to retained eamings 1,512 1,008