Problem 3-13 External Funds Needed

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:

INCOME STATEMENT Sales $30,800,000 Costs 26,503,400 Taxable income $4,296,600 Taxes 1,503,810 Net income $2,792,790 Dividends$1,117,116 Addition to retained earnings 1,675,674

BALANCE SHEETAssets Liabilities and Equity Current assets$7,240,000 Short-term debt$7,700,000 Long-term debt 3,696,000 Fixed assets 18,940,000 Common stock$4,374,000 Accumulated retained earnings 10,410,000 Total equity$14,784,000 Total assets$26,180,000 Total liabilities and equity$26,180,000

a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.) External financing needed $ b-1. Prepare the firms pro forma balance sheet for next year. (Do not round intermediate calculations.)

BALANCE SHEET Assets Liabilities and equity Current assets$ Short-term debt$ Fixed assets Long-term debt Common stock$ Accumulated retained earnings Total equity$ Total assets$ Total liabilities and equity$

b-2. Calculate the external funds needed. (Do not round intermediate calculations.) External financing needed $ c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate %