Harvard Prep Shops, a national clothing chain, had sales of $400 million last year. The business has a steady net profit margin of 15 percent and a dividend payout ratio of 20 percent. The balance sheet for the end of last year is shown below:

Balance Sheet December 31, 20XX ($ millions)
Assets		Liabilities and Shareholders' Equity
Cash	$9	Accounts payable	$35
Account receivable	27	Accrued expenses	12
Inventory	65	Other payables	37
		Common stock	40
Plant and equipment	215	Retained earnings	192
Total assets	$316	Total liabilities and equity	$316

Harvards anticipates a large increase in the demand for tweed sport coats and deck shoes. A sales increase of 25 percent is forecast.

All balance sheet items are expected to maintain the same percent-of-sales relationships as last year, except for common stock and retained earnings. No change in the number of common shares outstanding is scheduled, and retained earnings will change as dictated by the profits and dividend policy of the firm.

a. Will external financing be required for the Prep Shop during the coming year?

multiple choice

• Yes

• No

b. What would the need for external financing be if the net profit margin went up to 20 percent and the dividend payout ratio was increased to 55 percent? (Enter the answer in millions. Round the final answer to 2 decimal places.)

Required new funds $ million