An initiative has started that will increase sales by 8%. T…
An initiative has started that will increase sales by 8%. The firm has plenty of excess capacity to handle the added sales. Your firm has the following information: Exhibit 1. Income Statement. Year Ended Fall 2025. Sales $40,118,000 Variable Operating Costs $16,542,000 Fixed Operating Costs $19,898,000 Operating Profit $3,678,000 Interest Expense $634,608 Taxable Income $3,043,392 Tax Expense $958,668 NET INCOME $2,084,724 Exhibit 2. Balance Sheet. Fall 2025. Current Assets: Cash $789,000 Receivables $3,901,000 Inventory $3,002,000 Short term investments $1,209,000 Total Current Assets $8,901,000 Net Fixed Assets $10,203,000 TOTAL ASSETS $19,104,000 Liabilities: Payables $2,109,000 Short Term Notes $1,932,000 Accrued Expenses $1,200,000 Total Current Liabilities $5,241,000 Long Term Debt $4,895,000 Total Liabilities $10,136,000 Common Stock $6,000,000 Retained Earnings $2,968,000 Total Equity $8,968,000 TOTAL LIAB. + EQUITY $19,104,000 ..Consider the Additional Financing Needed Formula (AFN) A. What is the Value of A*? B. What is the vaue of L*? C. How much additional financing is needed?