Refer to Exhibit 16-1. In 2014, sales were $60 million. In 2015, management believes that sales will increase by 20% to a total of $72 million. The profit margin is expected to be 5%, and the dividend payout ratio is targeted at 40%. No excess capacity exists. Using the AFN equation, how much can sales grow above the 2014 level of $60 million without requiring any additional funds? In other words, what is the firms sustainable growth rate?

a. 12.28%

b. 14.63%

c. 15.75%

d. 17.65%

e. 18.14%

Exhibit 16-1 American Pulp and Paper recently reported the following balance sheet (in millions of dollars): American Pulp and Paper Balance Sheet of December 31, 2014 (Millions of Dollars) Cash $ 3.0 Accounts payable Accounts receivable 3.0 Notes payable Inventories 5.0 Total current assets $11.0 Total current liabilities Fixed assets 3.0 Long-term debt Common equity Total assets $14.0 Total liabilities and equity $ 2.0 1.5 $ 3.5 3.0 7.5 $14.0