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Harverd Prep Shops, a national clothing chain, had sales of $350 milion last year. The business has a steady net profit margin of 20 and
Harverd Prep Shops, a national clothing chain, had sales of $350 milion last year. The business has a steady net profit margin of 20 and a dividend payout ratio of 35 percent. The balance sheet for the end of last year is shown below Liabilities and $9 Accounts payable Cash 10 13 53 Other payables Common stock Plant and equipment 180 Retained earnings 164 287 Total liabilities and equity$287 Total assets 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 wilt change as dictated by the profits and dividend policy of the firm o. Will external financing be required for the Prep Shop during the coming year? O Yes No b. What wouid the need for external financing be if the net proft margin went up to 25 percent and the dividend payout ratio was ceased to 70 percent? (Enter the answer in millions. Round the final answer to 2 decimal places)
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