Major Manuscripts, Inc. 2012 Income Statement
Net sales	$	7,000
Cost of goods sold		6,200
Depreciation		150
Earnings before interest and taxes	$	650
Interest paid		26
Taxable Income	$	624
Taxes		200
Net income	$	424
Dividends	$	179

Major Manuscripts, Inc. 2012 Balance Sheet
	2012				2012
Cash	$	2,260		Accounts payable	$	1,190
Accounts rec.		800		Long-term debt		290
Inventory		2,000		Common stock	$	2,400
Total	$	5,060		Retained earnings		4,420
Net fixed assets		3,240
Total assets	$	8,300		Total liabilities & equity	$	8,300

Major Manuscripts, Inc., is currently operating at 70 percent of capacity. All costs and net working capital vary directly with sales. The tax rate, the profit margin, and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent?

Multiple Choice

• $118

• $237

• $119

• $506

• $270