The company is forecasting an increase in sales and is using the equation method (EFN model) to forecast the additional capital that it must raise. Which of the following conditions would be most likely to increase the external funds needed?

The companys profit margin increases.

The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

A sharp reduction in its forecasted sales.

The company decreases its retention rate.