CHALLENGE Baldwin Products Company anticipates reaching a sales level of $$6$ million in one year. The company expects earnings after taxes during the next year to equal $$400,000.$ During the past several years, the company has been paying $$50,000$ in dividends to its stockholders. The company expects to continue this policy for at least the next year. The actual balance sheet and income statement for Baldwin during $2016$ follow.

Baldwin Products Company Balance Sheet as of December $31,2016$

$\backslash$table$[[$Cash$,$$$200,000,$Accout

a$.$ Using the percentage of sales method, calculate the additional financing Baldwin Products will need over the next year at the $$6$ million sales level. Show the pro forma balance sheet for the company as of December $31,2017,$ assuming that a sales level of $$6$ million is reached. Assume that the additional financing needed is obtained in the form of additional notes payable.

b$.$ Suppose that the Baldwin Products' management feels that the average collection period on its additional sales$-$that is$,$ sales over $$4$ millionwill be $60$ days, instead of the current level. By what amount will this increase in the average collection period increase the financing needed by the company over the next year?

c$.$ If the Baldwin Products' banker requires the company to maintain a current ratio equal to $1\mathrm{.}6$ or greater, what is the maximum amount ff ${?}_f$ additional financing that can be in the form of bank borrowings $($notes payable$)?$ What other potential sources of financing are available to the company?nts payable,$$600,000$

Baldwin Products Company Balance Sheet as of December $31,2016$

$\backslash$table$[[$Cash$,$$$200,000,$Accounts payable,$$600,000$