1. A firm has total assets of $748,000, long-term debt of $400,000, stockholders' equity of $240,000, and current liabilities of $108,000. The dividend payout ratio is 40 percent and the profit margin is 7 percent. Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity. What is the external financing need if the current sales of $1,496,000 are projected to increase by 15 percent?

$35,480.10

$31,298.50

$28,670.64

$25,932.76

$23,743.20

2. Assume a machine costs $810,000 and lasts five years before it is replaced. The operating cost is $41,400 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 12 percent? (Hint: the EAC should account for both initial investment and annual operating costs)

$284,357.17

$266,101.88

$245,734.66

$229,570.94

$205,338.61