R & D Company is preparing their proforma financial statements for 2022. For 2022, management wants to ensure that their sales projections are reasonable and achievable. You have been asked to assist management with this. The balance sheet for R & D Company on December 31, 2021 has been provided to you to assist in your assessment.

R & D Company
Balance Sheet
as at December 31, 2021
Assets			Liabilities
Cash	$10,000		Accounts Payable	$80,000
Accts. Rec	95,000		Notes Payable	30,000
Inventory	65,000		Total Current Liabilities	110,000
Total Current Assets	170,000		Long term debt	21,000
			Total liabilities	131,000
Fixed assets	105,000		Shareholders' Equity
			Common stock	75,500
Total Assets	$275,000		Retained earnings	68,500
			Total Liabilities and Equity	$275,000

In addition, the sales manager prepared the following information from which to project sales in 2022 using three different scenarios in the economy:

Outcome	Probability	Units	Price
A	0.3	800	500
B	0.5	848	525
C	0.2	920	475

1. Calculate the expected value of the total sales projection.
2. Using your answer from part a., calculate the projected percentage increase in sales in 2022, assuming sales in 2021 were $350,000.
3. Management knows that an increase in sales will increase assets and liabilities and they want to ensure that the sales projections will be obtainable without increasing the debt ratio. To complete your assessment, calculate the sustainable growth rate given the following additional information:

Profit margin	8%
Total assets as a percentage of sales	42.5%
Dividend payout	70%

4. Compare the sales projections calculated in part a. and the calculation in part c. Would you recommend that management use the projections from part a.? Why or why not?