Problem $4-29($Algo$)$ Percent$-$of$-$sales method $[$LO$4-3]$

Conn Man's Shops, a national clothing chain, had sales of $$370$ million last year. The business has a steady net profit

margin of $7$ percent and a dividend payout ratio of $30$ percent. The balance sheet for the end of last year is shown.

The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for

overcoats and wool slacks. A sales increase of $10$ percent is forecast for the company.

All balance sheet items are expected to maintain the same percent$-$of$-$sales relationships as last year," except for common

stock and retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained

earnings will change as dictated by the profits and dividend policy of the firm. $($Remember$,$ the net profit margin is $7$

percent.$)$

$*$This includes fixed assets, since the firm is at full capacity.

a$.$ Will external financing be required for the company during the coming year?

No

Yes

b$.$ What would be the need for external financing if the net profit margin went up to $7\mathrm{.}50$ percent and the dividend payout

ratio was increased to $60$ percent?

Note: Negatlve amount should be Indlcated by a minus sign. Do not round Intermedlate calculations. Enter your

answer In dollars, not milllons, $($e$.$g$.,$ $$1,234,567).$ Input your answer as positive a value.

Answer is complete but not entirely correct.