4. Capacity Usage and Growth: In the previous problem, suppose the firm was operating at only 80 percent capacity in 2011. What is EFN now? 5. Calculating EFN: In Problem 3, suppose the firm wishes to keep its debt-equity ratio constant. What is EFN now? FLEURY, INC. 2011 Income Statement Sales Costs Other expenses Eamings before interest and taxes Interest paid Taxable income Taxes Net income Dividends $27,027 Addition to retained earnings 63,063 $743,000 578,000 15,200 $149,800 11,200 $138,600 48,510 $ 90,090 6. EFN and Internal Growth: Redo Problem 3 using sales growth rates of 15 and 25 percent in addition to 20 percent. Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? Why is this internal growth rate different from that found by using the equation in the textbook? FLEURY, INC. Balance Sheet as of December 31, 2011 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash $ 20,240 Accounts payable $ 54,400 Accounts receivable 32,560 Notes payable 13,600 Inventory 69,520 Total $ 68,000 Total $122,320 Long-term debt $126,000 Fixed assets Owners' equity Net plant and equipment $330,400 Common stock and paid-in surplus $112,000 Retained earnings 146,720 Total $258,720 Total assets $452,720 Total liabilities and owners' equity $452,720 4. Capacity Usage and Growth: In the previous problem, suppose the firm was operating at only 80 percent capacity in 2011. What is EFN now? 5. Calculating EFN: In Problem 3, suppose the firm wishes to keep its debt-equity ratio constant. What is EFN now? FLEURY, INC. 2011 Income Statement Sales Costs Other expenses Eamings before interest and taxes Interest paid Taxable income Taxes Net income Dividends $27,027 Addition to retained earnings 63,063 $743,000 578,000 15,200 $149,800 11,200 $138,600 48,510 $ 90,090 6. EFN and Internal Growth: Redo Problem 3 using sales growth rates of 15 and 25 percent in addition to 20 percent. Illustrate graphically the relationship between EFN and the growth rate, and use this graph to determine the relationship between them. At what growth rate is the EFN equal to zero? Why is this internal growth rate different from that found by using the equation in the textbook? FLEURY, INC. Balance Sheet as of December 31, 2011 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash $ 20,240 Accounts payable $ 54,400 Accounts receivable 32,560 Notes payable 13,600 Inventory 69,520 Total $ 68,000 Total $122,320 Long-term debt $126,000 Fixed assets Owners' equity Net plant and equipment $330,400 Common stock and paid-in surplus $112,000 Retained earnings 146,720 Total $258,720 Total assets $452,720 Total liabilities and owners' equity $452,720