18. Long-term planning models (S30.4)

a. Use the Dynamic Mattress model in Table 30.8 and the spreadsheets to produce pro forma income statements, balance sheets, and statements of cash flows for 2022–2026. Assume business as usual, except that sales and costs are now planned to expand by 30% per year, as are fixed assets and net working capital. The interest rate is forecasted to remain at 10%

and stock issues are ruled out. Dynamic also sticks to its 60% dividend payout ratio.

b. What are the firm’s debt ratio and interest coverage under this plan?

c. Can the company continue to finance expansion by borrowing?