Please assume that there is no financing feedback, i.e., interest expense stays the same.

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

1. At last years end, total assets for Roberts Inc. were $1.2 million and accounts payable were $375,000. Sales, which last year were $2.5 million, are expected to increase by 25 percent this year. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Robert Inc. typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 last year, and retained earnings were $295,000. Roberts Inc. plans to sell new common stock in the amount of $75,000. The Firms profit margin on sales is 6 percent; 60 percent of earnings will be retained.

a. What was Roberts long-term debt last year?

b. How much new, long-term debt financing will be needed in this year?