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1.Using the following data, determine the amount of additional financing needed for the next fiscal year: Sales Cash Accounts Receivable Inventory Fixed Assets $3,500 $400 $750 $2,050 $15,500 Sales Increase Per Year Tax Rate 25% 35% Accounts Payable Notes Payable Long-Term Debt Shareholder Equity Dividends $3,250 $12,000 $5,000 $1,250 $300 2. .CHALLENGE Baldwin Products Company anticipates reaching a sales level of $6 million in one year. The company expects earnings after taxes during the next year to equal $400,000. During the past several years, the company has been paying $50,000 in dividends to its stockholders. The company expects to continue this policy for at least the next year. The actual balance sheet and income statement for Baldwin during 2010 follow. Baldwin Products Company Balance Sheet as of December 31, 2010 Cash $ 200,000 Accounts payable $ 600,000 Accounts receivable 400,000 Notes payable 500,000 Inventories 1,200,000 Long-term debt 200,000 Fixed assets, net 500,000 Stockholders' equity 1,000,000 Total assets $2,300,000 Total liabilities and equity $2,300,000 Income Statement for the Year Ending December 31, 2010 Sales $4,000,000 Expenses, including interest and taxes $3,700,000 Earnings after taxes $ 300,000 a. Using the percentage of sales method, calculate the additional financing Baldwin Products will need over the next year at the $6 million sales level. Show the pro forma balance sheet for the company as of December 31, 2011, assuming that a sales level of $6 million is reached. Assume that the additional financing needed is obtained in the form of additional notes payable. b. Suppose that the Baldwin Products' management feels that the average collection period on its additional salesthat is, sales over $4 millionwill be 60 days, instead of the current level. By what amount will this increase in 142 Part 1: Introduction the average collection period increase the financing needed by the company over the next year? c. If the Baldwin Products' banker requires the company to maintain a current ratio equal to 1.6 or greater, what is the maximum amount of additional financing that can be in the form of bank borrowings (notes payable)? What other potential sources of financing are available to the company