External financing requirement

Not sure where to begin. with a sales increase of 15% and I believe that Cambridge will still need some financing, but using the percent of sales calculation I am not seeing it.

See below:

Cambridge Prep Shops, a national clothing chain, had sales of $200 million last
year. The business has a steady net profit margin of 12 percent and a dividend
payout ratio of 40 percent. The balance sheet for the end of last year is shown
below.

Balance Sheet
End of Year
(in $ millions)

Cambridge's marketing staff tells the president that in this coming year there
will be a large increase in the demand for tweed sport coats and various shoes.
A sales increase of 15 percent is forecast for the Prep Shop.

Assets
Cash . . . . . . . . . . . . . . . . . . . . . . $ 8,000
Accounts receivable . . . . . . . . . . 20,000
Inventory . . . . . . . . . . . . . . . . . . . 62,000
Current assets . . . . . . . . . . . $ 90,000
Fixed assets . . . . . . . . . . . . . . . . 100,000
Total assets . . . . . . . . . . . . . . . . . $190,000
Liabilities and Stockholders' Equity
Accounts payable . . . . . . . . . . . . $ 6,000
Accrued wages . . . . . . . . . . . . . . 2,000
Accrued taxes . . . . . . . . . . . . . . . 4,000
Current liabilities. . . . . . . . . . $ 12,000
Notes payable . . . . . . . . . . . . . . . 10,000
Long-term debt . . . . . . . . . . . . . . 20,000
Common stock . . . . . . . . . . . . . . 80,000
Retained earnings . . . . . . . . . . . . 68,000
Total liabilities and
stockholders' equity . . . . . . . . . $190,000
Percent-of-sales
method
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 10
Accounts receivable . . . . . . . . . . . . . 15
Inventory . . . . . . . . . . . . . . . . . . . . . . 50
Plant and equipment. . . . . . . . . . . . . 75
Total assets. . . . . . . . . . . . . . . . . . . . $150
Liabilities and Stockholders' Equity
Accounts payable . . . . . . . . . . . . . . . $ 15
Accrued expenses . . . . . . . . . . . . . . 5
Other payables . . . . . . . . . . . . . . . . . 40
Common stock . . . . . . . . . . . . . . . . . 30
Retained earnings. . . . . . . . . . . . . . . 60
Total liabilities and
stockholders' equity. . . . . . . . . . . . $150

All balance sheet items are expected to maintain the same percent-of-sales
relationships as last year, except for common stock and retained earnings. No
change is scheduled in the number of common stock shares outstanding, and
retained earnings will change as dictated by the profits and dividend policy of
the firm. (Remember the net profit margin is 12 percent.)

a. Will external financing be required for the Prep Shop during the coming
year?

b. What would be the need for external financing if the net profit margin went
up to 14 percent and the dividend payout ratio was increased to 70 percent?
Explain.