Reference no: EM132840407

Question - Harvard Prep Shops, a national clothing chain, had sales of $350 million last year. The business has a steady net profit margin of 25 percent and a dividend payout ratio of 30 percent. The balance sheet for the end of last year is shown below:

Balance Sheet December 31, 20XX ($ millions)
Assets		Liabilities and Shareholders' Equity
Cash	$7	Accounts payable	$35
Account receivable	21	Accrued expenses	10
Inventory	61	Other payables	11
		Common stock	30
Plant and equipment	205	Retained earnings	208
Total assets	$294	Total liabilities and equity	$294

Harvard's anticipates a large increase in the demand for tweed sport coats and deck shoes. A sales increase of 30 percent is forecast.

All balance sheet items are expected to maintain the same percent-of-sales relationships as last year, except for common stock and retained earnings. No change in the number of common shares outstanding is scheduled, and retained earnings will change as dictated by the profits and dividend policy of the firm.

What would the need for external financing be if the net profit margin went up to 30 percent and the dividend payout ratio was increased to 65 percent?

How much is the required new fund?