Problem:
In 1998, Hepler Company's sales were $26 million and its total assets were $10 million. Current liabilities were $4 million and total equity was $2 million. Hepler Company's sales for 1999 were forecasted to be $34 million, earnings after taxes were expected to be 5% of sales and dividends of $800,000 were expected to be paid.
Required:
Question: Assuming that the ratios "assets to sales" and "current liabilities to sales" in 1998 remain the same in 1999, determine the amount of additional financing required.
a. $1,746,154
b. $1,446,154
c. $6,946,154
d. $946,154
Note: Provide support for your underlying principle.