Question

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:
  

INCOME STATEMENT
Sales			$	31,600,000
Costs				26,675,500
Taxable income			$	4,924,500
Taxes				1,723,575
Net income			$	3,200,925
Dividends	$	1,280,370
Addition to retained earnings		1,920,555

  

BALANCE SHEET
Assets				Liabilities and Equity
Current assets	$	7,320,000		Short-term debt	$	5,688,000
				Long-term debt		6,636,000
Fixed assets		20,172,000
				Common stock	$	1,594,000
				Accumulated retained earnings		13,574,000
				Total equity	$	15,168,000
Total assets	$	27,492,000		Total liabilities and equity	$	27,492,000

  
a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.)
  
External financing needed           $  
  
b-1. Prepare the firm’s pro forma balance sheet for next year. (Do not round intermediate calculations.)
   

BALANCE SHEET
Assets				Liabilities and equity
Current assets	$			Short-term debt	$
Fixed assets				Long-term debt
				Common stock	$
				Accumulated retained earnings
				Total equity	$
Total assets	$			Total liabilities and equity	$

b-2. Calculate the external funds needed. (Do not round intermediate calculations.)
  
External financing needed           $

c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Sustainable growth rate             %

Answer 1