Harvard Prep Shops, a national clothing chain, had sales of $300 million last year. The business has a steady net profit margin of 25 percent and a dividend payout ratio of 40 percent. The balance sheet for the end of last year is shown below:

Balance Sheet

December 31, 20XX ($ millions)AssetsLiabilities and Shareholders' EquityCash$7Accounts payable$30Account receivable28Accrued expenses12Inventory65Other payables18Common stock80Plant and equipment140Retained earnings100Total assets$240Total liabilities and equity$240

Harvard's 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?

• Yes
• No

b.What would the need for external financing be if the net profit margin went up to 30 percent and the dividend payout ratio was increased to 75 percent?(Enter the answer in millions. Round the final answer to 2 decimal places.)

Required new funds$million

This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.