Munson Communications Company has just reported earnings for the year ended June 30, 2011. 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 does not plan to change this policy. Based on internal forecasts, the company expects the demand for its products to grow at a rate of 20 percent for the next year and has projected the sales growth for 2012 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 financing needed (EFN) to accommodate the expected growth?
d. Construct the firm's 2012 pro forma financial statements under the assumption that all external financing will be done with long-term debt.

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Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders' Equity: $ 1,728,639 3,009,421 11,492,993 Cash Accounts receivables Inventories Total current assets 16,231,054 Net fixed assets 13,345,24:2 Other assets Accounts payables Notes payables $ 4,666,673 2,507,094 Total current liabilities Long-term debt S 7,173,767 22,380,636 1,748,906 $40,360,595 Common stock Retained earnings 10,165,235 9,676,351 Total liabilities and equity $40,360,595 Total assets Munson Communications Company Income Statement for the Fiscal Year Ended June 30, 2011 Net sales Costs EBITDA Depreciation EBIT Interest EBT Taxes (35%) Net income $ 79,722,581 59,358,499 S 20,364,082 7,318,750 S 13,045,332 3,658,477 $ 9,386,855 3,285,399 6,101,456