Question

Appalachian Register, Inc. (ARI) has current sales of $50 million. Sales are expected to grow to $75 Million next year. ARI currently has accounts receivable of $10 million, inventories of $15 million and net fixed assets of $20 million. These assets are expected to grow at the same rate as sales over the next year Accounts payable are expected to increase from their current level of $10 million t a new level of $13 million next year. ARI wants to increase its cash balance at the end of next year by $2 million over its current bash balances, which average $4 million. Net income next year is forecasted to be $10 million. Next year, ARI plans to pay dividents of $1 million, up from $500,00 this year. ARI marginal tax rate is 34 percent. How much external financing does ARI require next year?