Problem 3 30 Points Suppose that Joe Grot Industries currently has the following balance sheet, and that sales for the year just ended were $5 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Joe Grot need from external sources to fund the expected growth?

Problem 3 30 Points Suppose that Joe Grot Industries currently has the following balance sheet, and that sales for the year just ended were $5 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Joe Grot need from external sources to fund the expected growth? Assets Liabilities and Equity Current Current $2,000,000 assets $1,500,000 liabilities Fixed 4,000,000 Long-term 1,500,000 assets debt Equity 3,000,000 Total Total $6,000,000 liabilities $6,000,000 and equity assets