Exercise 5 Assume that Garden Corporation generated $ 2 million in sales during year 2 and its year-end total assets were $ 2.5 million ($. 1 million of fixed assets).Also, at end of year 2, current liabilities were $, 500,000 consisting of $ 200,000 of Ns/P, $ 200,000 of As/P and $ 100,000 of accruals.Looking ahead to year 3, the company estimates that its current assets must increase 75 cents for every $ 1 increase in sales. Net profit margin is 5% and its payout ratio is 60% of net income.Assets were operated at 90% capacity in year 2.Only accounts payable and accruals are proportionally affected by sales. Projected sales will be $ 2.6 million.

Required:Determine the following:

a. The amount by which sales can increase without having additional investment in fixed assets.

b. Increase in current assets and current liabilities

c. Increase in working capital

d. Required increase in fixed assets

e. Projected profit (net income) for year 3

f. Projected Dividend payment in year 3