14A. Use income statement and balance sheet for GBS Co., from previous example. Assume that GBS Co. is currently operating at 97% of capacity and that sales are projected to increase to $20,000. What is the pro forma external financing needed in 2019 if capacity utilization increases to 100%? Assume that costs (including interest costs and depreciation), current assets and accounts payables will increase in the same proportion as sales. Also assume that accounts payables are a source of internal financing. The average tax rate will be 37% and 40% of net income will be paid in dividends.

According to my professor, the answer to this question is $808. Please walk through how you get to this solution.

14B. Use income statement and balance sheet for GBS Co., from previous example. GBS Co. is currently operating at 82% of capacity. In the 2019 pro forma, capacity utilization will increase by 15%. All costs (including interest expenses and depreciation) and net working capital vary directly with sales. The tax rate, the profit margin, and the dividend payout ratio will remain constant. How much additional debt is required in the 2019 pro forma, if no new equity is raised and sales are projected to increase to $19,665?

According to my professor, the answer to this question is - $1014. Please walk through how you get to this solution.

2018 Income Statement Dec.31, 2018 Balance Sheet Cash A/P Net sales COGS AR Long-term Debt CS $3,350 2,780 $10,000 4,510 Depreciation EBIT Interest Paid $1,040 700 7,500 $9,240 11,400 Inventory CA $17,100 11,200 1,650 $4,250 350 3,900 $1,300 $2,600 RE NFA EBT Taxes TA $20,640 TD+TE $20,640 Net Income Dividends $950