Munson Communications Company management has just reported earnings for the year ended June 30, 2017. Below are the firm’s income statement and balance sheet. The company had a 55 percent dividend payout ratio for the last 10 years and management does not plan to change this policy. Based on internal forecasts, management expects sales growth in 2018 to be 20 percent. Assume that equity accounts and long-term debt do not vary directly with sales but change when retained earnings change or additional capital is issued.

a. What is the firm’s internal growth rate (IGR)?
b. What is the firm’s sustainable growth rate (SGR)?
c. What is the external funding needed (EFN) to accommodate the expected growth?
d. Construct the firm’s 2018 pro forma financial statements under the assumption that long-term debt will provide all external funding.

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Munson Communications Company Balance Sheet as of June 30, 2017 Liabilities and Stockholders' Assets: Equity: $ 1,728,639 Accounts payable $ 4,666,673 Cash Accounts 3,009,421 Notes payable 2,507,094 receivable $ 7,173,767 11,492,993 Total current Inventories liabilities $16,231,054 Long-term debt 13,345,242 Total current assets Net fixed assets 22,380,636 Common stock 10,165,235 1,748,906 Retained earnings Other assets 9,676,351 Total assets $40,360,595 Total liabilities $40,360,595 and equity Munson Communications Company Income Statement for the Fiscal Year Ended June 30, 2017 Net sales $79,722,581 Costs 59.358,499 EBITDA $20,364,082 Depreciation EBIT 7,318,750 $13,045,332 3,658,477 Interest $ 9,386,855 EBT Тахes (35%) 3,285,399 $ 6,101,456 Net income