Comparative income statements and balance sheets for Merck ($ millions) follow:

Required:
a. Use the following ratios to prepare a projected income statement, balance sheet, and statement of cash flows for Year 3.
Sales growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.27%
Gross profit margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.27%
Selling, general, and administrative expense/Sales . . . . . . . . . . . . . . . . . . . 13.69%
Depreciation expense/Prior-year property, plant, & equipment (gross) . . . . . 8.76%
Interest expense/Prior-year long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . 4.94%
Income tax expense/Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.00%
Accounts receivable turnover (Sales/Accounts receivable). . . . . . . . . . . . . . 9.15
Inventory turnover (Cost of goods sold/Inventory). . . . . . . . . . . . . . . . . . . . . 8.10
Accounts payable turnover (Cost of goods sold/Accounts payable). . . . . . . . 4.91
Taxes payable/Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.41%
Total assets/Stockholders’ equity (financial leverage) . . . . . . . . . . . . . . . . . 2.35
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.06
Capital expenditures/Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.04%
b. Based on your initial projections, how much external financing (long-term debt and/or stockholders’ equity) will Merck need to fund its growth at projected increases insales?

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Year 2 Year1 Income Statement Net sales. Cost of goods 47,716 $40,343 . 28,97722,444 18,739 17,899 6,469 1,277 329 9,824 3,002 Gross profit Selling, general, and administrative expense 6,531 Depreciation and amortization expense .1,464 342 . 10,402 3,121 Interest expense. Income before tax Income tax expense .. Net income. $ 7,282 6,822 Outstanding shares . 2,976 2,968 Balance Sheet Cash Receivables . Inventories Other current assets.... 3,287 4,255 5,262 3,022 1,059 5,215 3,579 880 Total current assets. 12,96 13,598 Property, plant, and equipment Accumulated depreciation . .. . 18,956 16,707 5,225 ....5,853 Net property, plant, and equipment. . -. . _ Other noncurrent assets 13,103 11,482 15,075 ー 17,942 Total assets $44,006 $40,155 5,904 5391 3,319 1,244 9,954 11,614 11,768 3,601 Total noncurrent liabilities. . .16,413 15,369 30 6,266 31,500 27,395 (22,387) (18,858) 14,833 Accounts payable and accrued liabilities.. Short-term debt and current maturities of long-term debt Income taxes payable Total current liabilities Deferred income taxes and other liabilities Long-term debt 4,067 1,573 . 11,544 . 4,799 Common stock 30 6,907 Retained earnings Treasury stock Shareholders' equity.. Total liabilities and equity $44,007 $40,154