Please consider the exercise below

Following are two years of income statements and balance sheets for the Munich Exports Corporation.

Munich Exports Corporation

2009

2010

Cash

$ 50,000

$ 50,000

Accounts receivable

200,000

300,000

Inventories

450,000

570,000

Total current assets

700,000

920,000

Fixed assets, net

300,000

380,000

Total assets

$1,000,000

$1,300,000

Accounts payable

130,000

$ 180,000

Accruals

50,000

70,000

Bank loan

90,000

90,000

Total current liabilities

270,000

340,000

Long-term debt

400,000

550,000

Common stock ($.05 par)

50,000

50,000

Additional paid-in-capital

200,000

200,000

Retained earnings

80,000

160,000

Total liabilities and equity

$1,000,000

$1,300,000

2009

2010

Net sales

$1,300,000

$1,600,000

Cost of goods sold

780,000

960,000

Gross profit

520,000

640,000

Marketing

130,000

160,000

General and administrative

150,000

150,000

Depreciation

40,000

55,000

EBIT

200,000

275,000

Interest

45,000

55,000

Earnings before taxes

155,000

220,000

Income taxes (40% rate)

62,000

88,000

Net income

Cash dividends

$ 93,000

$37,000

$ 132,000

$52,000

A.Munich has a target dividend payout of 40 percent of net income. Based on the 2010 financial statements relationships, estimate the sustainable sales growth rate for the Munich Corporation for 2011.

B.Assume the Munich Corporation wants to grow its sales by 40 percent in 2011 over its 2010 level. Estimate the additional funds needed that will be necessary to support this rapid increase in sales.