Example:

New Problem:

Please use the Example problem to solve B on the bottom problem.

At year-end 2019 , total assets for Arrington Inc. were $1 million and accounts payable were $330,000. Sales, which in 2019 were $2.20 million, are expected to increase by 25% in 2020 . Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $495,000 in 2019 , and retained earnings were $275,000. Arrington plans to sell new common stock in the amount of $70,000. The firm's profit margin on sales is 4%;65% of earnings will be retained. a. What were Arrington's total liabilities in 2019 ? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest ce+ $ b. How much new long-term debt financing will be needed in 2020 ? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. $ b. Assets / Sales (A0/S0)=$1,000,000/$2,200,000=45.45% L0/Sales(L0/S0)=$330,000/$2,200,000=15,00%2020Sales=(1,25)($2,200,000)=$2,750,000S=$2,750,000$2,200,000=$550,000AFN=(A0/S0)(S)(L0/S0)(S)MS,(1Payout)Newcommonstock=(0,45)($550,000)(0.15)($550,000)(0.04)($2,750,000)(0.65)$70,000=$250,000$82,500$71,500$70,000=$26,000.00 Alternatively, using the forecasted financial statements: AFN=Newlong-termdebt=$226,00 * Given in problem that firm will sell new common stock =$70,000 PM=4%;1Payout=65%;NI2020=$2,200,0001.250.04=$110,000AdditiontoRE=NI2020(1-Payout)=$110,0000.65=$71,500 on sales is 6%;70% of earnings will be retained. $ as 25.000.000. Do not round intermediate calculations. Round your answer to the nearest cent. $