The Optimal Scam Company would like to see its sales grow at 20 percent for the foreseeable
future. Its financial statements for the current year are presented below.


	Income Statement 			Balance Sheet
	($ millions)    			($ millions)
Sales 			32.00      	Current assets 			16
Costs 			28.97 		Fixed assets 			16
Gross profit 		3.03 		Total assets 			32
Taxes 			1.03		
Net income 		2.00 		Current debt 			10
					Long-term debt 			4
Dividends 		1.40 		Total debt 			14
Retained earnings 	0.60 		Common stock 			14
					Ret. earnings 			4			
					Total liabilities and equity 	32


WHAT DETERMINES GROWTH?
The current financial policy of the Optimal Scam Company includes
Dividend-payout ratio 	(d) 70%
Debt-to-equity ratio 	(L) 77.78%
Net profit margin 	(P) 6.25%
Assets-sales ratio 	(T) 1

a. Determine Optimal Scam’s need for external funds next year.
b. Construct a pro forma balance sheet for Optimal Scam.
c. Calculate the sustainable growth rate for the Optimal Scam Company.
d. How can Optimal Scam change its financial policy to achieve its growth objective?