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Suppose that current assets, costs, and accounts payable maintain a constant ratio to sales. The firm retains 40% of earnings. If the firm is producing

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Suppose that current assets, costs, and accounts payable maintain a constant ratio to sales. The firm retains 40% of earnings. If the firm is producing at only 90% capacity, what is the total external financing needed if sales increase 25%?

\begin{tabular}{|c|r|c|r|} \hline StoneRosesCo.BalanceSheet & & & \\ \hline Cash & $50 & Accounts payable & $100 \\ \hline Inventory & $150 & Notes payable & 100 \\ \hline Fixed assets & $600 & Long-term debt & 350 \\ \hline & & Equity & 250 \\ \hline Total assets & $800 & Totalliabilities&equity & $800 \\ \hline \end{tabular} \begin{tabular}{|c|r|} \hline Stone Roses Co. Income statement & \\ \hline Sales & $800 \\ \hline Costs & 600 \\ \hline EBT & $200 \\ \hline Taxes (34\%) & 68 \\ \hline Net income & $132 \\ \hline \end{tabular}

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