Use the pro forma financial statements to answer the questions below. Change the assumptions in the assumptions box as needed to answer the questions. In addition to the assumptions listed on the spreadsheet, also assume that all asset accounts will grow at the same rate as sales, and that no new equity will be issued in 2014.

e. Return COGS/Sales to 75%. Now suppose Ottawa wants to solve the shortfall by increasing the retention ratio. How low would the dividend payout ratio have to be in order to eliminate the financing shortfall?

f. Return the dividend payout ratio to 40%. Now suppose Ottawa wants to make up any financing shortfall with increased debt. How high would the debt/equity ratio have to be to make up the difference?

g. Given the above options, and any other options that you can find, make a recommendation for a reasonable and practical solution to Ottawas financing shortfall. Your solution can involve changing multiple variables.

Ottawa Corporation Financial Statements, 2013 and Projected 2014 ( millions) INCOME STATEMENT Actual Projected S 3,500 S 4,025 2,775 3,019 Actual ProjectedQu 2013 2914a 2013 2014 150 S 173 Cas Accounts receivable 621 b 1208 w 403 1,050 EBIT Interest expense EBT Tax Net income Total current assets 740 3318 3,816 1,106 2,001 Property, plant, &equipment 1578 1815 297524Total assets 102 Total deb Shareholders equity S 195 34 1208 d 2212 416 Total babilities&equity 3,318 3,625 for 2014 15.09 Sales gowth rate COGS/sales Oper Exp/sales Drvidend payout ratio Saciainable growth rae 400% 2 Tax rate 3 Interest rate on debt 50 0 Sheet1