The 2001 balance sheet and income statement for the Lewis Company are shown below.

Lewis Company: Income Statement for December 31, 2001 (Thousands of Dollars)
Sales.................................... $8,000
Operating costs......................... 7,450
EBIT..................................... $ 550
Interest.................................... 150
EBT..................................... $ 400
Taxes (40%).............................. 160
Net income.............................. $ 240
PER SHARE DATA:
Common stock price................. $16.96
Earnings per share (EPS)............ $ 1.60
Dividends per share (DPS).......... $ 1.04
a. The firm operated at full capacity in 2001. It expects sales to increase by 20 percent during 2002 and expects 2002 dividends per share to increase to $1.10. Use the projected financial statement method to determine how much outside financing is required, developing the firm's pro forma balance sheet and income statement, and use AFN as the balancing item.
b. If the firm must maintain a current ratio of 2.3 and a debt ratio of 40 percent, how much financing will be obtained using notes payable, long-term debt, and common stock?

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Lewis Company: Balance Sheet as of December 31, 2001 (Thousands of Dollars) Cash Accounts receivable Inventories $ 80 240 720 $1,040 3,200 S 160 40 252 S 452 1,244 $1,696 1,605 939 $4,240 Accounts payable Accruals Notes payable Total current liabilities Total current assets Fixed assets Long-term debt Total debt Common stock Retained earnings Total assets $4,240 Total liabilities and equity