S&S Air, INC. 2009 Income Statement Sales $30,499,420 Cost of goods sold $22,224,580 Other expenses $3,867,500 Depreciation $1,366,680 EBIT $3,040,660 Interest $478,240 Taxable income $2,562,420 Taxes (40%) $1,024,968 Net income $1,537,452 Dividends $560,000 Add to retained earnings $977,452 S&S Air, INC. 2009 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

1. Calculate the internal growth rate (IGR) and sustainable growth rate (SGR) for S&S Air

2. Calculate the external financing needed (EFN) assuming 12% growth rate and full capacity operation. Use Excel to create pro-forma financial reports.

3. Assume that the company, currently operating at full capacity, cannot simply increase fixed assets by 12%. Instead, the firm must buy a new line of business at a cost of 5 million dollars (additional $5M in fixed assets). Calculate the external financing needed (EFN) and capacity utilization for next year. Use Excel to create pro-forma financial statements and clearly explain your thinking and calculations.