8) The optical Scam Company has forecast a sales growth of 25% for next year. The current financial statement are shown here.

Income Statement

Sales $31,500,000

Costs $26,641,500

Taxable Income $4,848,500

Taxes $1,700,475

Net Income $3,158,025

Dividends $1,263,210

Addition to retained earnings $1,894,815

Balance Sheet

Assets Liabilities and Owner's Equity

Current Assets $7,310,000 Short term debt $5,985,000

Fixed assets $19,780,000 Long term debt $4,130,000

Common Stock $4,080,000

Accumulated retained earning $12,895,000

Total Equity $16,975,000

Total Assets $27,090,000 Total Liabilities & Equity $27,090,000

A) Using the equation from the chapter calculate the external financing needed for next year.

B 1) Construct the firm's pro forma balance sheet for next year.

B 2) Calculate external financing needed.

C) Calculate the sustainable growth rate for the company based on the current financial statement.