Suppose that the 2017 actual and 2018 projected financial statements for Cramner Corp. are initially as shown in the following tables. In these tables, sales are projected to rise 35 percent in the coming year, and the components of the income statement and balance sheet that are expected to increase at the same 35 percent rate as sales are indicated with an italics font. Assuming that Cramner Corp. wants to cover the AFN with 45 percent equity, 25 percent long-term debt, and the remainder from notes payable, what amount of additional funds will they need to raise if debt carries an 8 percent interest rate?

Multiple Choice

• $660,600 equity; $367,000 long-term debt; $440,400 notes payable

• $660,600 equity; $440,400 notes payable; $367,000 long-term debt

• $1,468,000 equity; $0 long-term debt; $0 notes payable

• None of the options are correct

Income Statement 2017 2018 Actual Forecast Sales $3,000,000 $4,050,000 Costs except depreciation 1,000,000 1,350,000 Depreciation 1,500,000 2,025,000 EBIT $ 500,000 $675,900 Less Interest 80,000 126,772 EBT $ 420,000 $ 548, 228 Taxes (40%) 168,000 219, 291 Net income $ 252,999 $ 328,937 Common Dividends $ 189,900 $ 180,000 Addition to Retained Earnings $ 72,000 $ 148,937 Balance Sheet 2017 Actual 2018 Forecast $ 100, 0 200,000 390,000 $ 680,000 4,890,000 $4,600,000 $ 135,800 270,880 45,800 $ 810,000 5,490,080 $6,210,000 $ $ Assets Cash Accounts Receivable Inventories Total Current Assets Net Plant and Equipment Total Assets Liabilities and Equity Accounts Payable Notes Payable Accruals Total Current Liabilities Long-term bonds Total Debt Common Stock Retained Earnings Total Common Equity Total Liabilities and Equity 180,00 500,000 190,000 700,000 500.000 135,000 675,000 135,000 945,000 675.000 $ 5 $1,200,000 $3,000,000 400, 800 $3,400,000 $4,600,000 $1,620,000 $4,050,000 540, 800 $4,590,000 $6,210,000 Income Statement 2017 2018 Actual Forecast Sales $3,000,000 $4,050,000 Costs except depreciation 1,000,000 1,350,000 Depreciation 1,500,000 2,025,000 EBIT $ 500,000 $675,900 Less Interest 80,000 126,772 EBT $ 420,000 $ 548, 228 Taxes (40%) 168,000 219, 291 Net income $ 252,999 $ 328,937 Common Dividends $ 189,900 $ 180,000 Addition to Retained Earnings $ 72,000 $ 148,937 Balance Sheet 2017 Actual 2018 Forecast $ 100, 0 200,000 390,000 $ 680,000 4,890,000 $4,600,000 $ 135,800 270,880 45,800 $ 810,000 5,490,080 $6,210,000 $ $ Assets Cash Accounts Receivable Inventories Total Current Assets Net Plant and Equipment Total Assets Liabilities and Equity Accounts Payable Notes Payable Accruals Total Current Liabilities Long-term bonds Total Debt Common Stock Retained Earnings Total Common Equity Total Liabilities and Equity 180,00 500,000 190,000 700,000 500.000 135,000 675,000 135,000 945,000 675.000 $ 5 $1,200,000 $3,000,000 400, 800 $3,400,000 $4,600,000 $1,620,000 $4,050,000 540, 800 $4,590,000 $6,210,000