2. Percentage of Sales Approach (30 points) The assets and current liabilities of Firm A vary in direct proportion to sales. The current sales are $2000 and we can expect them to increase by 20% next year. Net Income is projected to at 5% of sales. The firm is not planning on issuing any more common stock nor paying dividends. Current % of sales Projected Cash Accounts receivable Inventory Fixed assets Total assets $120 $500 $840 $2,600 $4,060 % % % % % Accounts payable Long-term debt Common stock and surplus Retained earnings Total liabilities and equity $600 $700 $1,000 $1,760 $4,060 % % % % % hint: 1. Find the % of current sales for the items that vary with sales 2. Find the new sales based on growth rate 3. Find the projected sales for items that vary with sales (% of sales*new sales) 4. Find debt and equity items Common stock remains the same Net Income is added to RE Long-term debt will increase (since no common stock will be issued) by the amount needed to make the balance sheet balance