Harvard Prep Shops, a national clothing chain, had sales of $300 million last year. The business has a steady net profit margin of 10 percent and a dividend payout ratio of 35 percent. The balance sheet for the end of last year is shown below Balance Sheet December 31, 20xx ($ millions) Assets Liabilities and Shareholders' Equity Cash $4 Accounts payable $60 Account receivable Inventory 16 Accrued expenses 16 61 Other payables 23 Common stock 35 Plant and equipment Total assets 120 Retained earnings 67 $201 Total liabilities and equity $201 Harvard's anticipates a large increase in the demand for tweed sport coats and deck shoes. A sales increase of 20 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? Yes No O b. What would the need for external financing be if the net profit margin went up to 15 percent and the dividend payout ratio was Increased to 70 percent? (Enter the answer in millions. Round the final answer to 2 decimal places.) Required new funds $ 3.6 million < Prev 7 of 8 Next > Harvard Prep Shops, a national clothing chain, had sales of $300 million last year. The business has a steady net profit margin of 10 percent and a dividend payout ratio of 35 percent. The balance sheet for the end of last year is shown below: Balance Sheet December 31, 20xx (5 millions) Assets Liabilities and Shareholders' Equity Cash $4 Accounts payable 360 Account receivable Inventory 16 Accrued expenses 16 61 Other payables 23 Common stock 35 Plant and equipment Total assets 120 Retained earnings 67 $201 Total liabilities and equity $201 Harvard's anticipates a large increase in the demand for tweed sport coats and deck shoes. A sales increase of 20 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? Yes No O b. What would the need for external financing be if the net profit margin went up to 15 percent and the dividend payout ratio was increased to 70 percent? (Enter the answer in millions. Round the final answer to 2 decimal places.) Required new funds $ 3.6 million