Use the model in File C08 to solve this problem. Stendardi Industries' 2012 financial statements are shown in the following table.

Stendardi Industries: Balance Sheet as of December 31, 2012 ($ million)
Sales...................................................$ 80.0
Operating costs.......................................(71.3)
Earnings before interest and taxes..................$ 8.7
Interest.................................................( 2.0)
Earnings before taxes................................$ 6.7
Taxes (40%)..........................................( 2.7)
Net income............................................$ 4.0
Dividends (40%)....................................$ 1.60
Addition to retained earnings.....................$ 2.40
Assume that the firm has no excess capacity in fixed assets, that the average interest rate for debt is 12 percent, and that the projected annual sales growth rate for the next five years is 15 percent.
a. Stendardi plans to finance its additional funds needed with 50 percent short-term debt and 50 percent long-term debt. Using the projected balance sheet method, prepare the firm's pro forma financial statements for 2013 through 2015. Determine the following: (1) the additional funds needed, (2) the current ratio, (3) the debt ratio, and (4) the return on equity.
b. Sales growth could be five percentage points higher or lower than the projected 15 percent. Determine the effect of such variances on AFN and the key ratios.
c. Perform an analysis to determine the sensitivity of AFN and the key ratios for 2015 to changes in the dividend payout ratio as specified in the following, assuming that sales grow at a constant 15 percent. What happens to Stendardi's AFN if the dividend payout ratio (1) increases from 40 percent to 70 percent or (2) decreases from 40 percent to 20 percent?

Stendardi Industries: Balance Sheet as of December 31, 2012 ($ million) Cash Receivables Inventories $ 8.0 5.0 $13.0 12.0 20.0 27.0 72.0 $4.0 Accounts payable 2.0 Notes payable 16.0 Current liabilities $32.0 Long-term debt Current assets Net fixed assets 40.0 Common stock Retained earnings Total assets 72.0 Total liabilities and equity