Major Manuscripts, Inc., is currently operating at 80 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?

Major Manuscripts, Inc. 2012 Income Statement Net sales $ 8,700 Cost of goods sold 7,600 Depreciation 320 Earnings before interest and 780 taxes 45 Interest paid Taxable income Taxes $ 735 285 450 Net income $ $1 Dividends 196 Cash Accounts rec. Inventory Total Major Manuscripts, Inc. 2012 Balance Sheet 2012 $ 2.430 Accounts payable 970 Long-term debt 2,850 Common stock $ 6,250 Retained earnings 3,410 9,660 Total liabilities & Jequity 2012 $ 2,450 220 $ 2,400 4,590 Net fixed assets Total assets 9,660 Major Manuscripts, Inc., is currently operating at 80 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 $625 O O $346 O $101 O $245 O O $279