Peabody & Peabody has sales of million. It wishes to analyze expected performance and financing needs for 2 years ahead. Given the following information, respond to parts a. and b.

(1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable; , Inventory; ; Accounts payable, ; Net profit margin, .

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) A minimum cash balance of is desired.

(4) A new machine costing will be acquired in , and equipment costing will be purchased in . Total depreciation in is forecast as , and in of depreciation will be taken.

(5) Accruals are expected to rise to by the end of .

(6) No sale or retirement of long-term debt is expected.

(7) No sale or repurchase of common stock is expected.

(8) The dividend payout of of net profits is expected to continue.

(9) Sales are expected to be million in and million in .

(10) The December 31, , balance sheet is here

Assets			Liabilities and Stockholders Equity
Cash	$399,000		Accounts payable	$1,396,000
Marketable securities	200000		Accruals	403000
Accounts receivable	1196000		Other current liabilities	79500
Inventories	1796000		Total current liabilities	$1,878,500
Total current assets	$3,591,000		Long-term debt	2000500
Net fixed assets	4005000		Common stock	3717000
Total assets	$7,596,000		Total liabilities and stockholders' equity	$7,596,000

a. Prepare a pro forma balance sheet dated December 31, . b. Discuss the financing changes suggested by the statement prepared in part (a).