Cryo-Vac Expects Sales to Increase 20% Next Year from the Current

Multiple Choice

Cryo-vac expects sales to increase 20% next year from the current level of $5,000,000. The firm has current assets of $1,000,000 and fixed assets of $1,500,000. Cryo-vac has current liabilities of $750,000, of which $300,000 are in notes payable. What additional financing will Cryo-vac need to support the expected sales increase if its profit margin is 8% and the firm expects to pay out $200,000 in dividends? An increase in net fixed assets of $300,000 will be required.

A) $130,000
B) $70,000
C) Surplus of $70,000
D) $270,000