Hungry Kids 2012 Income Statement
Net sales	$	5,000
Cost of goods sold		3,600
Depreciation		700
Earnings before interest and taxes	$	700
Interest paid		185
Taxable Income	$	515
Taxes		208
Net income	$	307
Dividends	$	72
Addition to retained earnings	$	235

Hungry Kids 2012 Balance Sheet
	2012				2012
Cash	$	85		Accounts payable	$	1,675
Accounts rec.		500		Long-term debt		1,600
Inventory		990		Common stock	$	2,100
Total	$	1,575		Retained earnings		3,200
Net fixed assets		7,000
Total assets	$	8,575		Total liabilities & equity	$	8,575

Hungry Kids is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 4 percent. What is the external financing need?

$31

$32

$83

$84

$82