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External funds needed /Sustainable Growth Rate

Please see attached.

The Optical Scam Company has forecast a 20 percent sales growth rate for next year. The current financial statement are shown here :

Income Statement

Sales $ 38,000,000
Costs $ 33,400,000
Taxable Income $ 4,600,000
Taxes $ 1,610,000
Net Income $ 2,990,000

Dividends $1,196,000
Additional to retained earning $1,794,000

Balance Sheet

Assets Liabilities
________________________ _____________________________
Current Assets $ 9,000,000 Short term debt $8,000,000
Long term debt $6,000,000

Fixed Assets $ 22,000,000 Common Stock $ 4,000,000
Accumulated retained earnings $13,000,000
Total Equity $17,000,000

Total assets $31,000,000 Total Liabilities $ 31,000,000

a- Using the equation from the chapter, calculate the external funds needed for next year.
b-Conduct the firm's pro forma balance sheet for next year and confirm the external funds needed you calculated in part (a).
c-Calculate the sustainable growth rate for the company.
d-Can Optical Scam eliminate the need for external funds by changing its dividend policy?
What other options are available to the company to meet its growth objectives?


Solution Summary

The solution explains how to calculate the amount of external funds needed and the sustainable growth rate