Harvard Prep Shops, a national clothing chain, had sales of $400 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)AssetsLiabilities and Shareholders' EquityCash$10Accounts payable$60Account receivable50Accrued expenses10Inventory59Other payables26Common stock65Plant and equipment185Retained earnings143Total assets$304Total liabilities and equity$304

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 or No?

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?(Enter the answer in millions. Round the final answer to 2 decimal places.)

Required new funds$million