Following are the 2012 balance sheet and income statement for the Woods Company.

Woods Company: Income Statement for the Year Ending
December 31, 2012 ($ thousand)
Sales..................................................$ 8,000
Operating costs......................................(7,450)
Earnings before interest and taxes.................$ 550
Interest................................................ ( 150)
Earnings before taxes................................$ 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 2012. During 2013, it expects sales to increase by 20 percent and dividends per share to increase to $1.10. Use the projected balance sheet method to determine how much outside financing is required, develop 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, after the first pass, will be obtained using notes payable, long-term debt, and common stock?
c. Create the second-pass financial statements by incorporating financing feedbacks and using the ratios calculated in part (b). Assume that the interest rate on debt averages 10 percent.

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Woods Company: Balance Sheet as of December 31, 2012 S thousand) Cash Accounts receivable Inventories $ 80 Accounts payable 720 Notes payable 3,200 Long-term debt $ 160 40 252 $ 452 1,244 1,605 939 $4,240 240 Accruals $1,040 Current liabilities Current assets Fixed assets Common stock Retained earnings Total assets 4,240 Total liabilities and equity