1. The financial statements for Blue Development Corp are shown below. Sales for 2018 are expected to grow by 20%. COGS, other expenses, current assets, fixed assets and accounts payable increase with sales (20% growth). Interest expense will remain constant as will the tax rate (35%) and dividend payout ratio.

Blue Development Inc.	2017 Income Statement	Pro-forma 2018
Sales	$891,600
COGS	693,600
Other Expenses	18,240
EBIT	179,760
Interest Expense	13,400
Taxable Income	166,360
Taxes (35%)	58,226
Net Income	108,134
Dividends	$35,6684
Addition to retained earnings	$72,450

a) Based on the information above, complete the pro forma income statement for 2018 including dividends and retained earnings.

b) Assume the firm is operating at full production capacity and no new debt or equity is issued. What is the external financing needed to support the 20% growth in sales?

Blue Devlopment Inc.	2017 Balance Sheet
Assets	Liabilities

Current Asssets		Current Liabilities
Cash	$24,280	Accounts Payable	$65,200
Accounts Recievable	37,070	Notes Payable	16,320
Inventory	83,400	Total	81,520
Total	144,750	Long Term Debt	$155,000
Fixed Assets		Owner's Equity
Net PP&E	396,500	Common Stock	130,000
		Retained Earnings	174,730
		Total	304,730
Total Assets	$541,250	Total Liability & Equity	$541,250

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Blue Development Inc.	Pro-forma 2018 Balance Sheet
Assets	Liabilites

Current Assets		Current Liabilities
Cash		Accounts Payable
Accounts Recievable		Notes Payable
Inventory		Total
Total		Long Term Debt
Fixed Assets	-	Owner's Equity	-
Net PP&E		Common Stock
		Ratined Earnings
		Total
Total Assets		Total Liabilities & Equity

c) In light of the relatively small EFN in part (b), what other financing alternative would you suggest in order to support the 20% growth?