S&S Air, Inc. 2006 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 441,000 Accounts payable $ 889,000 Accounts receivable 708,400 Notes payable 2,030,000 Inventory 1,037,120 Total current liabilities $ 2,919,000 Total current assets $ 2,186,520 Long-term debt $ 5,320,000 Fixed assets Net plant and equipment $16,122,400 Shareholder equity Common stock $ 350,000 Retained earnings 9,719,920 Total equity $10,069,920 Total assets $18,308,920 Total liabilities and equity $18,308,920 QUESTIONS 1. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? 2. S&S Air is planning for a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the companys sales increase at this growth rate? 3. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fi xed assets must be increased in specifi c 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 fi xed cost structure. Assume S&S Air is currently producing at 100 percent 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?