The Smith Co

Multiple Choice

The Smith Co., which is currently operating at full capacity, has sales of $3,000, current assets of $800, current liabilities of $400, net fixed assets of $1,900, and a 6% profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 9% next year. If all assets, liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

A) $10.80
B) $40.00
C) $103.50
D) $196.20
E) $207.00