Chapter 9 Corporate Valuation and Financial Planning 9-8 Financing Deficit Stevens Textile Corporation's 2018 financial statements are shown here: Balance Sheet as of December 31, 2018 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 1,080 Accounts payable $ 4,320 6,480 Accruals 2,880 9,000 Line of credit 0 $16,560 Notes payable 2,100 12,600 Total current liabilities $9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 $29,160 Total liabilities and equity $29,160 Total assets Income Statement for December 31, 2018 (Thousands of Dollars) Sales $36,000 Operating costs 32,440 Earnings before interest and taces $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) $ 837 Addition to retained earnings $ 1,023 a. Suppose 2019 sales are projected to increase by 154 over 2018 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2019. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all addi- tional debt in the form of a line of credit is added at the end of the year, which means that you should hase the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained eamings. Assume that the company was operating at full capacity in 2018, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. b. What is the resulting total forecasted amount of the line of credit? c. In your answers to parts a and b, you should not have charged any inter- est on the additional debt added during 2019 because it was assumed that the new debt was added at the end of the year. But now suppose that the new debt is added throughout the year. Don't do any calculations, but how would this change the answers to parts a and b