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 Assets Cash Account receivable Trventory to Balance sheet December 11, 2006) Liabilities and Shareholders' Equity Accounts payable Acer pse other payables Conan stock 21 tained earning $30 Yotal liabilities and equity 51 13 77 10 192 plant and wupont Total assets 16 Harvard's anticipates a large increase in the demand for tweed sport costs 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 form a. Will external financing be required for the Prep Shop curing the coming year? Yes NO Chow 7 125 poud Assets Harvard Prep Shops, a national clothing chain, had toles 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 lost year is shown below Balance sheet December 31. (los) Liabilities and Shareholders' Equity Account receivable Accrued expenses Twentory other payables Common stock plant and equipment Total assets Total Habilities and equity Cash Accounts pable 27 $15 12 37 00 192 215 Metained earnings $310 Harvard's anticipates a large increase in the demand for tweed sport costs and deck shoes. A sales increase of 25 percent is forecast All balance sheet items are expected to maintain the same percent-of-soles 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? NO 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 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
