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Great Subs believes it can increase sales by 50% without any increase in net fixed assets

Economics

Great Subs believes it can increase sales by 50% without any increase in net fixed assets. Earnings after tax are expected to be $2,000.The company pays no dividends. What additional financing will Subs need to finance this growth? Subs' balance sheet currently is as follows:

 

Cash $2,500 Accounts playable $5,600
Accounts Rec. 4,400 Notes payable 10,000
Inventory 6,000 Long term debt 15,000
Fixed assets, net 47,700 Stockholder's equity 30,000
  $60,600   $60,600

A)$3,350 surplus, no additional financing needed

B) $1,650

C) $3,650

D) None of the answers is correct.

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