1. The most recent financial statements for Last in Line, Inc., are

shown below:

Income Statement Balance Sheet

Sales $23,000 Assets $115,000 Debt $ 38,600

Costs 16,500 Equity 76,400

------- -------- -------

Taxable income $ 6,500 $115,000 $115,000

Taxes (40%) 2,600 ======== ========

-------

Net Income 3,900

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Assets and costs are proportional to sales. Debt and equity are

not. A dividend of $1,560 was paid, and the company wishes to

maintain a constant payout ratio. Next year's sales are projected

to be $27,600. What is the external financing needed?

2. The most recent financial statements for 7 Seas, Inc., are shown

below:

Income Statement Balance Sheet

Sales $ 3,400 Current Assets $4,400 Current Liab. $ 880

Costs 2,800 Fixed assets 5,700 Long-term debt 3,580

------- Equity 5,640

Taxable income $ 600 -------- -------

Taxes (34%) 204 $10,100 $10,100

------- ======== ========

Net Income 396

=======

Assets, costs, and current liabilities are proportional to sales.

Long-term debt and equity are not. The company maintains a constant

50% payout ratio. As with every other firm in its industry, next

year's sales are projected to increase by exactly 15%. What is the

external financing needed?