Great Subs Believes It Can Increase Sales by 50% Without

Multiple Choice

Great Subs believes it can increase sales by 50% without any increase in net fixed assets. Earnings after tax are expected to be $2,000. The company pays no dividends. What additional financing will Subs need to fund this growth? Subs' current balance sheet is as follows: $\begin{array}{|l|r|r|r|}\hline \text { Cash } & \$ 2,500 & \text { Accounts Payable } & \$ 5,600 \\\hline \text { Accounts Rec. } & 4,400& \text { Notes Payable } & 10,000 \\\hline \text { Inventory } & 6,000 &\text { Long-term Debt } & 15,000 \\\hline \text { Fixed Assets, net } & 47,700& \text { Stockholders' Equity } & 30,000 \\\hline&\$60,600&&\$60,600\\\hline\end{array}$

A) $3,350 surplus -- no additional financing needed
B) $1,650
C) $3,650
D) None of these are correct