Tulane, Inc.

2015 Income Statement

Net sales $7,500

Less: Cost of goods sold 6,415

Less: Depreciation 200

Earnings before interest and taxes 885

Less: Interest paid 25

Taxable Income $ 860

Less: Taxes 300

Net income $ 560

Dividends $252

Addition to retained earnings $308

2015 Balance Sheet

Cash $1,050 Accounts payable $1,750

Accounts rec. 850 Long-term debt 330

Inventory 2,100 Common stock 2,500

Total $4,000 Retained earnings 1,020

Net fixed assets 1,600

Total assets $5,600 Total liabilities & equity $5,600

Tulane, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent?