John Laporte is creating pro-forma statements for his business for the next year in order to determine his External Funds Needed (EFN). He projects that the firms sales will grow by 30%. The dividend payout ratio will remain constant at 40%. Tax rate is and will remain at 37%. The firm just recently built a new warehouse, so the Cost of goods sold amount is expected to increase to 75% of sales next year.

Currently the firm is operating its fixed assets at 90% capacity; it does not plan to sell any of their existing plant and equipment but will purchase new equipment to support growth if there is a need. Also, the firm assumes that next year their Inventory Turnover will increase to 24 times a year, meaning they will turn their inventory over approximately every 15 days (a year has 365 days).

All of the companys sales are credit sales; its customers observe the collection period terms of 30 days and accordingly accounts receivable are 30 days of sales. John expects no changes in collections policy or in the rate of the customer payments for next year. Other net working capital, operating costs and other expenses are expected to increase directly with sales.

Income Statement	Current year	Next year pro-forma
Sales	$ 7,000,000
Cost of goods sold	$ 4,900,000
Other Expenses	$ 700,000
EBIT	$ 1,400,000
Interest	$ 6,000
Taxable Income	$ 1,394,000
Tax (37%)	$ 515,780
Net Income	$ 878,220	$ 856,170
Dividends	$ 351,288
Balance Sheet	Current year	Next year pro-forma
Cash	$ 350,000	$ 455,000
Accounts Receivable	$ 575,342
Inventory	$ 245,000
Current Assets	$ 1,170,342
Net Plant and Equipment	$ 3,000,000
Total Assets	$ 4,170,342	$ 4,997,320
Accounts Payable	$ 300,000
Notes Payable	$ 94,000
Current Liabilities	$ 394,000
Long-Term Debt	$ 130,000
Common Stock	$ 16,000
Retained Earnings	$ 3,630,342
Total Owners Equity	$ 3,646,342
Total Liabilties & Owners Equity	$ 4,170,342	$ 4,774,044

Given the information on John Laport's pro-forma statements (in the question text above) and the information in the question, does the firm need external funds (EFN) to grow at 30%?

The Net Plant and Equipment account in the John Laport's pro-forma statements (in the question text above) will:

Suppliers give Johns firm (in the question text above) 5/10 net 30 terms. Is John taking advantage of this discount?