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Chapter 9: Projecting Financial Statements 347 C. Briefly describe differences in calculation assumptions between the sustainable growth rate and addi tional funds needed models. s. (Sustainable Sales Growth Rates and Additional Funds Needed) Following are two years of income state- ments and balance sheets for the Munich Exports Corporation. MUNICH EXPORTS CORPORATION BALANCE SHEETS 2015 Cash $ 50.000 Accounts receivable 200,000 Inventories 450.000 Total current assets 700,000 Fixed assets, net 300.000 Total assets $1.000.000 Accounts payable $ 130,000 Accruals 50.000 Bank loan 90,000 Total current liabilities 270.000 Long-term debt 400.000 Common stock $0.05 part 50,000 Additional paid-in-capital 200,000 Retained earings 80,000 Total liabilities and equity $1,000,000 2016 $ 50,000 300,000 570.000 920,000 380.000 $1,300,000 $ 100 000 70,000 90 000 340,000 550.000 50.000 200,000 160,000 $1,300,000 2015 INCOME STATEMENTS Net sales Cost of goods sold Gross profit Marketing General and administrative Depreciation EBIT Interest Earnings before taxes Income taxes (40% rate) Net income Cash dividends Added Retained Earnings $1,300,000 780,000 520,000 130,000 150,000 40,000 $ 200,000 45.000 155,000 62,000 $ 93,000 $ 37,000 56.000 2016 $1,600,000 960,000 640,000 160,000 150,000 55,000 $ 275,000 55,000 220.000 88,000 $ 132,000 $ 52,000 70,000 2. Munich has a target dividend payout of 40 percent of net income. Based on the 2016 financial state- ments relationships, estimate the sustainable sales growth rate for the Munich Corporation for 2017 Show how your answer in Part A would change if Munich decided not to pay any dividends in 2017 Assume the Munich Corporation wants to grow its sales by 40 percent in 2017 over its 2016 leve Estimate the additional funds needed that will be necessary to support this rapid increase in sales. Sales are forecasted to increase an additional 20 percent in 2018 over 2017. Estimate the two-ye AFN that the Munich Corporation will need to finance its 2017 and 2018 sales growth plans. preadsheet Exercises/Problems e following activities are for students with spreadsheet software skills.) 000 Cornoration anticinates 20 nercent incre On page 347 of our text, you will find financial statements for Munich Exports Corporation. 1. Build a proforma income statement, budget, for 2017, 2018, and 2019. Assume the same percentage of growth in sales the firm experienced in 2016 continues in following years (round growth to even percentages without decimals). Assume COGS as a percentage of sales from 2016 continues constant in following years. Assume that after 2016, marketing costs increase by 5% annually. Assume general and administrative, depreciation, and interest costs from 2016 remain the same in following years. The tax rate will not change. It is not necessary to project dividends. . . Follow the assumptions stated above, not those stated in the book. 2. For each of your annual budgets (2017, 2018, and 2019), calculate net income as a percentage of sales. 3. For 2017 through 2019, does net income as a percentage of sales increase? Why or why not