Problem:
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stones. Upton's balance sheet as of December 31, 2007, is shown here (millions of dollars).
Cash...........................$ 3.5 Accounts payable.....................$ 9.0
Receivables.................26.0 Notes payable............................18.0
Inventories...................58.0 Accruals........................................8.5
Total current assets..$87.5 Total current liabilities...............$35.5
Net fixed assets..........35.0 Mortgage Loan..............................6.0
Common stock............15.0
Retained earnings.......66.0
Total assets............$122.5 Total liabilities and equity..........$122.5
Sales for 2007 were $350 million, while net income for the year was $10.5 million. Upton paid dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Assume that all ratios remain constant.
(a) What will Upton Computer's external capital requirements be if sales increase by $70 million?