$.$ Last year$$s balance sheet and income statement for the Lewis Company are shown below. The firm operated at full capacity. It expects sales to increase by $20$ percent during this year and expects this year$$s dividends per share to increase to $$1\mathrm{.}10.$

a$.$ Use percent of sales method $($i$.$e$.,$ constant ratio method$)$ to determine how much outside financing is required, by developing the firm$$s pro forma balance sheet and income statement, and using the AFN $($additional funds needed$)$ as the balancing item. This means that the AFN Equation should not be used in answering this part of the problem.

b$.$ If the firm must maintain a $$current ratio$$ of $2\mathrm{.}3$ and a $$total liabilities to total assets$$ ratio of $40$ percent, how much financing will be obtained using notes payable, long$-$term debt, and common stock?

Balance Sheet Income Statement

Cash $80$ Sales $8,000$

Accounts receivable $240$ Operating costs $7,450$

Inventory $720$ EBIT $550$

Net fixed assets $3,200$ Interest expense $150$

Total assets $4,240$ EBT $400$

Taxes @ $40\%160$

Accounts payable $160$ Net income $240$

Notes payable $252$

Accruals $40$ Per Share Data

Long$-$term debt $1,244$ Share price $16\mathrm{.}96$

Common stocks $1,605$ Earnings per share $($EPS$)1\mathrm{.}60$

Retained earnings $939$ Dividends per share $($DPS$)1\mathrm{.}04$

Total liabilities and equity $4,240$