Instructions:

1.1 Calculate internal and sustainable growth rates. Explain what they mean. (10 points)

1.2 Using the percentage of sales approach, prepare proforma financial statements for the year 2022. (20 points)

1.3 Calculate the amount of external financing needed in 2022. What financing options are available for the company? (5 points)

1.4 Assuming that the company operated at 85% capacity in 2021, re-calculate the amount of external financing needed in 2022. (5 points)

1.5 Discuss the role of financial planning. (5 points)

CASE 1 (45 points) The most recent financial statements for Michel Corporation follow. Sales for year 2022 are projected to increase by 12 percent. Tax rate will be 25% in year 2022. The company maintains a constant dividend pay- out ratio. The firm is operating at full capacity. Income Statement 2021 Sales 40 670 530 30 338 915 5 157 255 Cost of goods sold Operating expenses Depreciation Operating income Interest 1 822 652 3 351 708 636 962 Taxable income 2 714 746 Taxes 678 687 2 036 059 Net income Dividends 619 307 Addition to retained earnings 1 416 753 Assets Current assets Balance Sheet 2021 Liabilities and Equity Current liabilities 461 153 Accounts payable 938 496 740 615 Notes payable 2 143 023 1 085 026 Total CL 3 081 519 Cash Accounts receivable Inventory Total CA 2 286 794 Long-term debt 5 534 228 Fixed assets Net PP&E 17 904 498 Shareholder equity Common stock 404 087 11 171 458 Retained earnings Total equity 11 575 545 Total Assets 20 191 292 Total L&E 20 191 292