Northern California Heating and Cooling Inc. has a six-month backlog of orders for it
Northern California Heating and Cooling Inc. has a six-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 35 percent with a $10 million investment in plant and machinery. The firm wants to maintain a 40 percent debt/assets ratio in its capital structure; it also wants to maintain its past dividend policy of distributing 45 percent of the prior year's net income. Last year, net income was $5 million. How much external equity must Northern California seek at the beginning of next year to expand capacity as desired?