Last years 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 years dividends per share to increase to $1.10.

a. Use percent of sales method (i.e., constant ratio method) to determine how much outside financing is required, developing the firms pro forma balance sheet and income statement, and use the AFN as the balancing item.

Balance Sheet

Cash 80

Accounts receivable 240

Inventory 720

Net fixed assets 3,200

Total assets 4,240

Accounts payable 160

Notes payable 252

Accruals 40

Long-term debt 1,244

Common stocks 1,605

Retained earnings 939

Total liabilities and equity 4,240

Income Statement

Sales 8,000

Operating costs 7,450

EBIT 550

Interest expense 150

EBT 400

Taxes @ 40% 160

Net income 240

Per Share Data

Share price 16.96

Earnings per share (EPS) 1.60

Dividends per share (DPS) 1.04