Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales.

Carter Paint has an aftertax profit margin of 5 percent and a dividend payout ratio of 30 percent.
If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Assume Carter Paint is already using assets at full capacity and that plant must be added.)

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BALANCE SHEET (in $ millions) Liabilities and Stockholders' Equity Assets Cash. . $15 Accounts payable. Accrued wages.. Accounts receivable 15 30 Accrued taxes.. Inventory. 4 Current liabilities. Current assets 50 25 Fixed assets . Notes payable 40 30 Common stock. 15 Retained earnings. 20 Total liabilities and stockholders' equity. Total assets.. $90 $90