The Landis Corporation had 2008 sales of $100 million. The balance sheet items that vary directly with sales and the profit margin are as follows:
Cash, 5%. Accounts receivable, 15. Inventory, 25. Net fixed assets, 40. Accounts payable, 15. Accruals, 10. Profit margin after taxes, 6%.
The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 2008 was $33 million and $5 million, respectively. Notes payable are currently $12 million.
a) How much additional external capital will be required for next year if sales increase 15 percent? (Assume the company is already operating at full capacity)