2. Use the following balance sheet and simplified income statement in answering parts (a) (c) below: BALANCE SHEET Cash $75,000 Accounts receivables100,000 Inventory95,000 Fixed assets$500,000 Total assets$770,000 Account payable$135,000 Other current liabilities50,000 Long-term debt150,000 Stockholders equity (75,000 shares)$435,000 Total liability and equity$770,000 INCOME STATEMENT Sales$1,250,000 Less: Cost of goods sold635,000 Less: All expenses (incl. taxes)370,000 Net Income$245,000 a.) Based on the financial information above, conduct a liquidity analysis for this firm by determining the current ratio, net working capital, the ratio of current assets/total assets, and the cash conversion period. b.) What is the current market price of the firms stock (P0) if the firms P/E ratio is 11.5? Hint: Note that a firms earnings per share = NI/S, where NI = earnings. Therefore P0 = P/E x E/S c.) A proposal is made by this firms CFO to increase the current ratio to 2x. The CFO suggests that the firm issue 5,000 new shares of common stock (ignore any flotation costs) and the estimated price per share based on secondary market conditions will be $28.50. The proceeds from the equity issue will be added to the firms cash account. Assuming everything else remains the same, determine: i) The impact on the firms liquidity position by re-calculating the current ratio, net working capital, the ratio of current assets/total assets, and the cash conversion period as you did in part (a) above. ii) The new market price (assume the P/E ratio is constant at 11.5). iii) Based on your estimate of the new price per share of this companys stock, should the firm adopt the changes suggested by the CFO? Briefly explain.