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Suppose that Gamma Company currently has the following balance sheet, and that sales for the year just ended were $7 million. The firm also has

Suppose that Gamma Company currently has the following balance sheet, and that sales for the year just ended were $7 million. The firm also has a profit margin of 27 percent, a retention ratio of 20 percent, and expects sales of $8 million next year. If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Gamma need from external sources to fund the expected growth?

Assets Liabilities & Equity

Current Assets $2,000,000

Fixed Assets 5,000,000

Current Liabilities $2,500,0000

Long term Debt 1,000,000

Equity 3,000,000

Total Assets $7,000,000 Total Liabilities & Equity $7,000,000

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