Problem 4-31

Cholesterol Dairy Products has plants in five provinces and operates a very large home delivery service. Sales last year were $100 million, and the balance sheet at year-end is similar in percent of sales to that of previous years (and this will continue in the future). All assets and current liabilities will vary directly with sales. Assume the firm is already using capital assets at full capacity.

Balance Sheet

(in $ millions)AssetsLiabilities and Shareholders' EquityCash$5Accounts payable$7Accounts receivable10Accrued wages5Inventory25Accrued taxes3Current assets$40Current liabilities$15Capital assets40Long-term debt20Common stock25Retained earnings20Total assets$80Total liabilities and shareholder's equity$80

The firm has an aftertax profit margin of 5 percent and a dividend payout ratio of 35 percent.

a.If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion.(Enter the answer in millions. Round the final answer to 3decimal places.)