Tozer Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stores. Tozer's balance sheet as of December 31, 2001, is shown here (in millions of dollars):

Sales for 2001 were $350 million, while net income for the year was $10.5 million. Tozer paid dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Assume that all ratios remain constant.
a. If sales are projected to increase by $70 million, or 20 percent, during 2002, use the AFN equation to determine Tozer's projected external capital requirements.
b. Construct Tozer's pro forma balance sheet for December 31, 2002. Assume that all external capital requirements are met by bank loans and are reflected in notes payable.
c. Now calculate the following ratios, based on your projected December 31, 2002, balance sheet. Tozer's 2001 ratios and industry average ratios are shown here for comparison:

Cash Receivables Inventories $ 3.5 26.0 58.0 S 87.5 35.0 Accounts payable Notes payable Accruals $ 9.0 18.0 8.5 $ 35.5 6.0 15.0 66.0 $122.5 Total current liabilities Mortgage loan Common stock Retained earnings Total current assets Net fixed assets Total assets $122.5 Total liabilities and equity TOZER COMPUTERS 12/31/01 2.5x 33.9% 13 .0% INDUSTRY AVERAGE 12/31/01 3x 30% 12% 12/31/02 Current ratio Debt/total assets Rate of return on equity