$$

Income Statement

Description

Amount$/$Rand

Sales

$30499420$

Cost of goods sold

$22224580$

Other expenses

$3867500$

Depreciation

$1366680$

EBIT

$3040660$

Interest

$478240$

Taxable income

$2562420$

Taxes $(40\%)$

$1024968$

Net income

$1537452$

Dividends:$560000$

Add to retained earnings:$977452$

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Statement of Financial Position $($Balance Sheet$)$

ASSETS

CURRENT ASSETS$$ Rands

Cash

$441000$

Accounts receivable

$708400$

Inventory

$1037120$

Total current assets

$2186520$

Net plant and equipment

$16122400$

Total assets

$18308920$

LIABILITIES & EQUITY

CURRENT LIABILITIES

Accounts payable

$889000$

Notes payable

$2030000$

Total current liabilities

$2919000$

Long$-$term debt

$5320000$

SHAREHOLDER EQUITY

$$

Common stock

$350000$

Retained earnings

$9719920$

Total equity

$10069920$

Total liabilities and equity

$18308920$

$$

QUESTIONS:

a$)$ Calculate the internal growth rate and sustainable growth rate for the Company. What do these numbers mean?$[15]$

b$)$ The company $$is planning for a growth rate of $12$ percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company$$s sales increase at this growth rate? $[30]$

Most assets can be adjusted based on sales percentages, such as cash, which can be increased by any amount. However, fixed assets require specific increments because it's impractical to purchase a fraction of a new plant or machine. This results in a "staircase" or "lumpy" fixed cost structure. Assuming the company is operating at full capacity, any increase in production necessitates setting up a new production line at a cost of R$5,000,000.$ Calculate the new External Financing Needed $($EFN$)$ under this assumption. What does this imply for the company's capacity utilization next year?