Final answer:
To calculate the amount of external financing the company needs to seek, we determine the increase in assets required for the expected sales and subtract the projected profit to be paid out as dividends and the increase in assets from the projected profit. Consequently, the firm will have to seek $236,250 in external financing.
Step-by-step explanation:
To determine how much external financing the firm will have to seek, we need to calculate the increase in assets that will be required to accommodate the expected sales. We are told that inventory and accounts receivable will increase by $480,000.
Since the company has a steady profit margin of 15 percent, we can calculate the projected profit amount by multiplying the expected sales revenue by the profit margin: $2,500,000 * 0.15 = $375,000.
Since the dividend payout is 35 percent, the amount of profit that will be paid out as dividends is: $375,000 * 0.35 = $131,250.
To calculate the amount of external financing needed, we subtract the amount of profit to be paid out as dividends and the increase in assets from the projected profit: $375,000 - $131,250 - $480,000 = $-236,250.
Therefore, the firm will have to seek external financing of $236,250.