Morrissey Technologies Balance Sheet as of Dec 31, 2016. Cash = 180,000. Receivables = 360,000, Inventories = 720,000, Total current assets = 1,260,000, Fixed assets = 1,440,000, Total assets = 2,700,000. Accounts payable = 360,000, Accrued liabilities = 180,000, Notes payable = 56,000, Total current liabilities = 596,000, Long term debt = 100,000, common stock = 1,800,000, Retained earnings = 204,000, Total liabilities and equity = 2,700,000.

Morrissey Technologies Income Statement os of Dec 31, 2016. Sales = 3,600,000, Operating costs including depreciation = 3,279,720, EBIT = 320,280, Interest = 20,280, EBT = 300,000, Taxes (40%) = 120,000, Net income = 180,000, Common stock price = 45.00, EPS = 1.80, DPS = 1.08.

Suppose that in 2017, sales increase by 10%. 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 ahs no excess capacity. However; the firm would like to reduce its operating cost/sales ratio to 87.5% and increase its total liabilities-to-assets ratio to 30%. (It believes its liabilites-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 forcasts 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 make at the firm's current stock price of 45.00.

a. Construct the forcasted financial statements assuming that these changes are made. What are the firm's forecasted notes payable and long-term debt balances? What is the forcasted addition to retaind earnings?

b. If the profit margin remains a 5% and the dividend payout ratio remains at 60%, at what growth rate in sale will the additional financing requirements be exacly zero? In other works, what is the firm's sustaninable growth rate?

Please show all work.