Hilltop Inc financial statement is given as follows:

Hilltop Inc.
2005 Income Statement
Net Sales	12,400
Less: Cost of Goods Sold	9,100
Less: Depreciation	1,800
Earnings before interest and taxes	1,500
Less: Interest Paid	340
Taxable Income	1,160
Less: Taxes	406
Net Income	754

Dividends 301.60

Addition to RE 452.40

Hilltop, Inc.
2005 Balance Sheet
	2005					2005
Cash	900			Accounts Payable		1,330
Accounts rec.	840			Long-term debt		3,700
Inventory	620			Common Stock		4,600
Other Short Term	90			Retained Earnings		2,840
Total	2,450			Total Equity		7,440
Net fixed assets	10,020
Total Assets	12,470			Total liabilities & equity		12,470

1- Assume that Hilltop Inc. is operating at 80 percent of capacity. All costs (including depreciation and interest) and net working capital vary directly with sales. What is the amount of the pro forma net fixed assets if sales are projected to increase by 25 percent?

A. $9,616

B. $10,020 C. $12,040 D. $15,0251 E. $18,781

2. What is the internal growth rate of Hilltop Inc. (based on the current statements) if the dividend payout ratio remains constant?

A. 1.45 percent B. 2.48 percent C. 3.77 percent D. 4.62 percent E. 6.47 percent

3. Assume that Hilltop Inc. is operating at full capacity and wants to grow at 6.47%. Also assume that Hilltop Inc. maintains a constant dividend payout ratio. All costs (including depreciation and interest) vary directly with sales. All assets and accounts payable vary directly with sales also. The firm does not want to obtain any additional external equity and wants to finance growth through long term debt. How much new long term debt must the firm acquire?

A. $239.088 B. $2,323.42 C. $5,983.376 D. $124.672

E. None of the above