Planning for Growth at S&S Air periods when dhis end, they After Chris completed the ratio analysis for S&S Air (see Chap- planning resulted in missed sales, as wellas ter 3), Mark and Todd approached him about planning for ext and Todd were unable to draw salaries. To year's sales. The company had historically used litle planning lk Cris to prcpare a for investment needs As a resul, the company experienced some challenging times because of cash fow problems. The lack of ent The incomme statemens and so the company can begin to address any outside isvestment roquire heet are shown bere 2008 Income Statement Cost of goods sold Other expenses $30,499.420 22 224 580 3,867.500 $ 3,040,660 $ 2,562,420 Taxable income Taxes (40%) Net income 1537 452 Add to retained earnings 977.452 PART Financiel Starements and Long-Term Financial Planning Liabilities and Equity Curment assets $ 889.000 441,000 Accounts payable 708,400 Notes payable 1.037 120unent liabilities 2919.000 S 5.320,000 $ 2,186,520 Long-term deb Fixed assets Net plant and equipment $16 122,400 Shareholder equity Common stock 350,000 $18,308.920 Total iabilities and equity $18,308.920 However, fixed assets must be increased in speciic amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a com- pany has a "staircase or "lumpy ixed cost stracture. Assume S&S Air is currently producing at 100 percent capacity. As a result, to increase production, the company must set up an entirely new line at a cost of $5,000,000. Calculate the new EFN with this tion. What does this imply about capacity utilization for I. Calculate the intermal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? S&S Air is planning for a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the sales increase at this growth rate? 2. 3. Most assets can be increased as a percentage of sales For instance, cash can be increased by any amount