Problem 19.39 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 27 percent for the next year and has projected the sales growth for 2012 to be 27 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. Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders' Equity: Cash $1,728,639 Accounts payables $4,666,673 Accounts receivables 3,009,421 Notes payables 2,507,094 Inventories 11,492,993 Total current assets $16,231,054 Total current liabilities $7,173,767 Net fixed assets 13,345,242 22,380,636 Long-term debt 1,748,906 Common stock Other assets 10,165,235 Retained earnings 9,676,351 Total assets $40,360,595 Total liabilities and equity $40,360,595 Munson Communications Company Income Statement for the Fiscal Year Ended June 30, 2011 Revenues $79,722,581 Costs 59,358,499 EBITDA $20,364,082 7,318,750 Depreciation EBIT $13,045,332 3,658,477 Interest EBT $9,386,855 3,285,399 Taxes (35%) Net income $6,101,456 a. What is the firm's internal growth rate (IGR)? (Round answer to 2 decimal places, e.g. 15.25%.) Munson's internal growth rate (IGR) is %. b. What is the firm's sustainable growth rate (SGR)? (Round answer to 2 decimal places, e.g. 15.25%.) Munson's sustainable growth rate (SGR) is %. C. What is the external financing needed (EFN) to accommodate the expected growth? (Round answer to nearest whole dollar, e.g. 5,275.) Munson's external financing needed (EFN) to accommodate the expected growth is $ d. Construct the firm's 2012 pro forma financial statements below under the assumption that all external financing will be done with long-term debt. (Round answers to nearest whole dollar, e.g. 5,275.) Munson Communications Company Income Statement Revenues Costs EBITDA Depreciation EBIT Interest Taxes (35%) Net income Munson Communications Company Pro Forma Balance Sheet for Year Ended June 30, 2011 Assets: Liabilities and Stockholders' Equity: Cash Accounts payables Accounts receivables Notes payables Inventories Total current assets Total current liabilities $ Net fixed assets Long-term debt Other assets Common stock Retained earnings Total liabilities and equity Total assets Problem 19.39 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 27 percent for the next year and has projected the sales growth for 2012 to be 27 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. Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders' Equity: Cash $1,728,639 Accounts payables $4,666,673 Accounts receivables 3,009,421 Notes payables 2,507,094 Inventories 11,492,993 Total current assets $16,231,054 Total current liabilities $7,173,767 Net fixed assets 13,345,242 22,380,636 Long-term debt 1,748,906 Common stock Other assets 10,165,235 Retained earnings 9,676,351 Total assets $40,360,595 Total liabilities and equity $40,360,595 Munson Communications Company Income Statement for the Fiscal Year Ended June 30, 2011 Revenues $79,722,581 Costs 59,358,499 EBITDA $20,364,082 7,318,750 Depreciation EBIT $13,045,332 3,658,477 Interest EBT $9,386,855 3,285,399 Taxes (35%) Net income $6,101,456 a. What is the firm's internal growth rate (IGR)? (Round answer to 2 decimal places, e.g. 15.25%.) Munson's internal growth rate (IGR) is %. b. What is the firm's sustainable growth rate (SGR)? (Round answer to 2 decimal places, e.g. 15.25%.) Munson's sustainable growth rate (SGR) is %. C. What is the external financing needed (EFN) to accommodate the expected growth? (Round answer to nearest whole dollar, e.g. 5,275.) Munson's external financing needed (EFN) to accommodate the expected growth is $ d. Construct the firm's 2012 pro forma financial statements below under the assumption that all external financing will be done with long-term debt. (Round answers to nearest whole dollar, e.g. 5,275.) Munson Communications Company Income Statement Revenues Costs EBITDA Depreciation EBIT Interest Taxes (35%) Net income Munson Communications Company Pro Forma Balance Sheet for Year Ended June 30, 2011 Assets: Liabilities and Stockholders' Equity: Cash Accounts payables Accounts receivables Notes payables Inventories Total current assets Total current liabilities $ Net fixed assets Long-term debt Other assets Common stock Retained earnings Total liabilities and equity Total assets