Financing Deficit Garlington Technologies Inc. 's 2013 financial statements are shown here: Balance Sheet as of December 31, 2013 Cash Receivables Inventories Total current assets Fixed assets Total assets $ 180,000 360,000 720,000 $1,260,000 1,440,000 $2,700,000 Accounts payable Notes payable Line of credit Accruals Total current liabilities Common stock Retained earnings Total liabilities and equity $ 360,000 156,000 0 180,000 $ 696,000 1,800,000 204,000 $2,700,000

Operating costs EBIT Interest Pre-tax earnings Taxes (40%) Net income Dividends $3,600,000 3,279,720 $ 320,280 18,280 $ 302,000 120,800 $ 181,200 108,000 Suppose that in 2014 sales increase by 10% over 2013 sales and that 2014 dividends will increase to $112,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2013. Use an interest rate of 13%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new debt will be