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Fareview Systems 2018 balance sheet and income statement are shown below: Fareview Balance Sheet as of December 31, 2018 Cash $ 30,000 Accounts payable $

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Fareview Systems 2018 balance sheet and income statement are shown below: Fareview Balance Sheet as of December 31, 2018 Cash $ 30,000 Accounts payable $ 200,000 Receivables 90,000 Notes payable 40,000 Inventories 100,000 Long term debt 80,000 Net fixed assets 400,000 Shareholders' equity 300,000 Total assets $ 620,000 Total liabilities & equity $ 620,000 Fareview Income Statement, Year Ending, December 31, 2018 Sales $800,000 Expenses, including interest and taxes 720,000 Net income $ 80,000 Fareview Systems expects to reach a sales level of $1 million and nemecome of $100,000 for next year. The company has been paying out $10,000 in dividends per year over the past few years and expects to continue paying this same amount for the next several years. a. Calculate the additional financing the firm will need over the next year in order to achieve sales of $1 million. Assume that all ratios remain constant and that any bank borrowing is non- spontaneous financing: (4 marks) b. Suppose that the firm's management feels that the average collection period on its additional sales --that is, sales over $800,000 will be 60 days, instead of the current level. By what amount will the Increase in the average collection period increase the financing needed by the firm over the next year? (3 marks) c. Independent of (a) and (b) above, assume that Fareviews fixed assets are only used at 75% of capacity. By what percentage could 2019 sales increase over 2018 sales without the need for an increase in fixed assets? (2 marks)

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