The most recent financial statements for ABC Inc., follow. Sales for next year are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase spontaneously with sales. ABC, INC. Income Statement of Last Year Sales $ 759,000

Costs 594,000

Other expenses 15,000 ________________________________________ ________________________________________

Earnings before interest and taxes $ 150,000

Interest paid 16,000 ________________________________________ ________________________________________

Taxable income $ 134,000

Taxes (30%) 40,200 ________________________________________ ________________________________________

Net income $ 93,800 ________________________________________________________________________________ ________________________________________________________________________________

Dividends $ 35,140 Addition to retained earnings 58,660 ________________________________________

ABC, INC. Balance Sheet of Last Year Assets Liabilities and Owners Equity Current assets Current liabilities

Cash $ 21,840 Accounts payable $ 56,000 Accounts receivable 34,160 Notes payable 15,200 ________________________________________ ________________________________________ Inventory 71,120 Total $ 71,200 ________________________________________ ________________________________________ ________________________________________ ________________________________________

Total $ 127,120 Long-term debt $ 142,000

Fixed assets Owners equity Net plant and equipment $ 363,000 Common stock and paid- in surplus $ 128,000 ________________________________________ ________________________________________ Retained earnings 148,920 ________________________________________ ________________________________________ Total $ 276,920 ________________________________________ ________________________________________ Total assets $ 490,120 Total liabilities and owners equity $ 490,120 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________

A, What will be the firm's retained earnings next year?

B. The firm is operating at its full capacity, and it will have to increase its fixed assets as it increases its current assets. What will be the firm's total assets next year?

C. What is the additional funding requirement for the next year?

D. If the firm has enough idle capacity and will not have to increase its fixed assets, what will be the additional funding requirement for the next year?