This is the information
The Lanford Corporation had 2008 sales of $110 million. The other pertinent
financial data for 2008 is as follows:

2008 Sales $110,000,000
Dividend Payout Rate 55%
Balance in Retained Earnings $41,150,000
Common Stock $11,000,000
Long-Term Bonds $3,550,000
Notes Payable $13,600,000
Profit Margin after Taxes 8.0%

The BALANCE SHEET items that vary directly with sales are as follows:
Cash 7%
Accounts Receivable 15%
Inventory 28%
Net Fixed Assets 36%
Accounts Payable 14%
Accruals 9%

The Common Stock and the company's Long-Term Bonds will remain constant
from 2008 through 2009 at $11 million and $3.55 million, respectively.

The question is:
a. How much additional external capital will be required for next year if sales
increase 15%? (Assume that the company is already running at full capacity).

Here are my calculations


Original sales... $110,000,000
Increased by 15%... multiply by 0.15
Equals an increase by $1,650,000

Cash 7%
Acct receivable 15%
Inventory 28%
Total current assets 50%
Plant and equipment 36% (I put this as the fixed assets... is this correct?)
Total 86%

Multiply increase in sales ($1,650,000) by 86% (0.86) equals $1,419,000

Acct payable 14%
Accruals 9%
Total 23%

Subtract 23%(0.23) times Increase in sales ($1,650,000) equals $379,500

Then subtract Profit Margin (8% or 0.08) times total new sales (add increase to original sales equals $111,650,000) times (1-0.55) which is the dividend payout rate.
This gives me 0.08 times $111,650,000 times 0.45 which is 893,200 times 0.45 which is 401,940

All together it is 1,419,000 - 379,000 - 401,940
1,419,000 - 781,440 = 637,560
So my answer is the additional external capital required will be $637,560.

The question is:
a. How much additional external capital will be required for next year if sales
increase 15%? (Assume that the company is already running at full capacity).

Here are my calculations


Original sales... $110,000,000
Increased by 15%... multiply by 0.15
Equals an increase by $16,500,000
Cash 7%
Accounts receivable 15%
Inventory 28%
Total current assets 50%
Plant and equipment 36%
Total 86%
Multiply increase in sales ($16,500,000) by 86% (0.86) equals $14,190,000
Accounts payable 14%
Accruals 9%
Total 23%
Subtract 23%(0.23) times Increase in sales ($16,500,000) equals $3,795,000
Then subtract Profit Margin (8% or 0.08) times total new sales (add increase to original sales equals $126,500,000) times (1-0.55) which is the dividend payout rate. This gives me 0.08 times $126,500,000 times 0.45 which is $10,120,000 times 0.45 which is $4,554,000
All together it is 14,190,000 - 3,795,000 - 4,554,000
14,190,000 - 8,349,000 = 5,841,000
So my answer is the additional external capital required will be $5,841,000.