Cryo-vac expects sales to increase 20% next year from the current level of $5,000,000. The firm has current assets of $1,000,000 and fixed assets of $1,500,000. Cryo-vac has current liabilities of $750,000 of which $300,000 are in notes payable. What additional financing will Cryo-vac need to support the expected sales increase if its profit margin is 8% and the firm expects to pay out $200,000 in dividends? An increase in net fixed assets of $300,000 will be required.

Hint:

Assuming the (current assets) and (current liabilities- notes payable) will grow at the same rate as the sales.

change in current asset = ??

change in fixed asset = ??

change in (current liability - notes payable) = ??

net income = ??

addition to retained earnings = net income - dividend = ??

additional financing =

change in current asset

+ change in fixed asset

- change in (current liabilities - notes payable)

- addition to retained earnings

How much is the change in assets (current + fixed assets)?

Group of answer choices

200,000

0

100,000

300,000