A. Munich has a target dividend payout of 40 percent of net income. Based on the 2019 financial statements relationships, estimate the sustainable sales growth rate for the Munich Corporation for 2020.

B. Show how your answer in Part A would change if Munich decided not to pay any dividends in 2020.

C. Assume the Munich Corporation wants to grow its sales by 40 percent in 2020 over its 2019 level. Estimate the additional funds needed that will be necessary to support this rapid increase in sales.

D. Sales are forecasted to increase an additional 20 percent in 2021 over 2020. Estimate the two-year AFN that the Munich Corporation will need to finance its 2020 and 2021 sales growth plans.

5. (Sustainable Sales Growth Rates and Additional Funds Needed) Following are two years of income statements and balance sheets for the Munich Exports Corporation. MUNICH EXPORTS CORPORATION BALANCE SHEETS 2018 2019 Cash $ 50,000 $ 50,000 Accounts receivable 200,000 300,000 Inventories 450,000 570,000 Total current assets 700,000 920,000 Fixed assets, net 300,000 380,000 Total assets $1,000,000 $1,300,000 Accounts payable $ 130,000 $ 180,000 Accruals 50,000 70,000 Bank loan 90,000 90,000 Total current liabilities 270,000 340,000 Long-term debt 400,000 550,000 Common stock ($0.05 par) 50,000 50,000 Additional paid-in-capital 200,000 200,000 Retained earnings 80,000 160,000 Total liabilities and equity $1,000,000 $1,300,000 INCOME STATEMENTS 2018 2019 Net sales $1,300,000 $1,600,000 Cost of goods sold 780,000 960,000 Gross profit 520,000 640,000 Marketing 130,000 160,000 General and administrative 150,000 150,000 Depreciation 40,000 55,000 EBIT $ 200,000 $ 275,000 Interest 45,000 55,000 Earnings before taxes 155,000 220,000 Income taxes (40% rate) 62,000 88,000 Net income $ 93,000 $ 132,000 Cash dividends $ 37,000 $ 52,000 Added Retained Earnings 56,000 70,000