Harvard Prep Shops, a national clothing chain, had sales of $350 million last year. The business has a steady net profit margin of 20 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)

Assets Liabilities and Shareholders' Equity

Cash $6 Accounts payable $30

Account receivable 18 Accrued expenses 13

Inventory 63 Other payables 20

Common stock 80

Plant and equipment 200 Retained earnings 144

Total assets $287 Total liabilities and equity $287

Harvards 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.

b. What would the need for external financing be if the net profit margin went up to 25 percent and the dividend payout ratio was increased to 75 percent?