Review "Mini Case: Planning for Growth at S&S Air" in your textbook on page 129, also found at the end of Chapter 4 in your textbook. Then, answer the following questions:

1. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? How do you know?
2. S&S Air is planning for a growth rate of 12% next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company's sales increase at this growth rate? Explain your reasoning.
3. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets must be increased in specific amounts because it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a company has a "staircase" or "lumpy" fixed cost structure. Assume S&S Air is currently producing at 100% 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 assumption. What does this imply about capacity utilization for the company next year?
4. Consider how long term planning and growth is affected by location in the world. Discuss how you would advise S&S Air about planning and growth in your own country and expansion into other countries?
   

MINICASE Planning for Growth at S&S Air After Chris completed the ratio analysis for S&S Air (see as periods when Mark and Todd were unable to draw salaries. Chapter 3), Mark and Todd approached him about planning To this end, they would like Chris to prepare a financial plan for next year's sales. The company had historically used lit- for the next year so the company can begin to address any the planning for investment needs. As a result, the company outside investment requirements. The income statement and experienced some challenging times because of cash flow balance sheet are shown here: problems. The lack of planning resulted in missed sales, as well S&S AIR, INC 2021 Income Statement Sales $37,038,492 Cost of goods sold 27,629,530 Other expenses 4,696,692 Depreciation 1,659,882 EBIT $ 3,052,388 Interest 580,078 Taxable income $ 2.472,310 Taxes (21%) 618,078 Net income $ 1,854,232 Dividends $ 565,000 Add to retained earnings 1,289,232 S&S AIR, INC. 2021 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 419,970 Accounts payable $ 854,685 Accounts receivable 674,475 Notes payable 1,951,642 Inventory 988.129 Total current liabilities $ 2,806,327 Total current assets $ 2,082,574 Long-term debt $ 5,100,000 Fixed assets Net plant and equipment $16,305,556 Shareholder equity Common stock $ 410,000 Retained earnings 10,071,803 Total equity $10,481,803 Total assets $18,388,130 Total liabilities and equity $18,388,130