company need to meet its target fixed assets/sales ratio? -13 ADDITIONAL FUNDS NEEDED Morrissey Technologies Inc's 2016 financial statements are shown here. Morrissey Technologies Inc.: Balance Sheet as of December 31, 2016 s 180,000 360,000 Accounts payable Accrued liabilities s 360,000 180,000 56,000 $ 596,000 100,000 1,800,000 Cash 720,000 Notes payable Total current assets $1,260,000 Total current liabilities Long-term debt Common stock Fixed assets 1,440,000 Retained earmings Total assets 2.700,000Total liabilities and equity$2 700,000 Morrissey Technologies Inc: Income Statement for December 31, 2016 53,600,000 Sales Operating costs including depreciation 3279 720 EBIT Interest EBT Taxes (40%) Net Income s 320,280 20,280 S 300,000 S 180000 Per Share Data: Common stock price Eamings per share (EPS) Dividends per share (DFS) $45.00 s 180 s 1.08 Suppose that in 2017, sales increase by 10% over 2016 sales. The firm currently has 100,000 shares outstanding. It expects to maintain its 2016 dividend payout ratio and believes that its assets should grow at the same rate as sales. The firm has no excess capacity. However the firm would like to reduce its operating costs/sales ratio to 87.5% and increase its total liabilities-to-assets ratio to 300%. (It believes its liabilities-to-assets ratio currently is too low relative to the industry average.) The firm will raise 30% of the 2017 forecasted interest. bearing debt as notes payable, and it will issue long-term bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 12.5%. Assume that any common stock issuances or repurchases can be made at the firm's current stock price of S$45. a. Construct the forecasted financial statements assuming that these changes are made. What are the firm's forecasted notes payable and long-term debt balances? What is the forecasted addition to retained earnings? b. If the profit margin remains at 5% and the dividend payout ratio remains at 60%, at what growth rate in sales will the additional financing requirements be exactly zero? In other words, what is the firm's sustainable growth rate? (Hint: Set AFN equal to zero and solve for g)