If LaPearla’s long-term debt and paid-in capital accounts remain at their 2005 levels, the tax rate remains at the 2005 rate, and all other income statement and balance sheet accounts are sales-driven with an expected growth rate of revenues of 10%, in 2006 LaPearla will have a financing:

A. deficiency if it pays no dividends.

B. surplus if it pays out 50% of its net income in dividends.

C. deficiency if it pays out 50% of its net income in dividends.

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LaPearla Company Income Statement for Year 2005 (in millions) LaPearla Company Balance Sheet, End of Year 2005 (in millions). Revenues 10,000 Current assets 2,000 Cost of goods sold 5,500 Net plant and equipment 18,000 Gross profit 4,500 Total asser 20,000 Selling, general, and 800 administrative expenses Operating income 3,700 Current liabilities 1,000 Interest expense 500 Long-term debt 5,000 Earnings before taxes 3,200 Common stock and paid-in capital 500 Taxes 960 Retained earnings 13,500 Net income 2,240 Total liabilities and equity 20,000