Problem:
Wagner Industrial Motors, which is currently operating at full capacity, has sales of $2,120, current assets of $680, current liabilities of $340, net fixed assets of $1,490, and a 5 percent 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 percent next year.
Required:
Question: If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?
Note: Be sure to show how you arrived at your answer.