The 2017 financial statements for Growth Industries are presented below. Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.30.

INCOME STATEMENT, 2017
Sales				$	380,000
Costs					240,000
EBIT					140,000
Interest expense					28,000
Taxable income					112,000
Taxes (at 50%)					56,000
Net income					56,000
Dividends	$	16,800
Addition to retained earnings		39,200

BALANCE SHEET, YEAR-END, 2017
Assets					Liabilities
Current assets					Current liabilities
Cash	$	7,000			Accounts payable	$	14,000
Accounts receivable		12,000			Total current liabilities	$	14,000
Inventories		31,000			Long-term debt		280,000
Total current assets	$	50,000			Stockholders equity
Net plant and equipment		320,000			Common stock plus additional paid-in capital		15,000
					Retained earnings		61,000
Total assets	$	370,000			Total liabilities and stockholders' equity	$	370,000

Construct a spreadsheet model for Growth Industries similar to the one in Spreadsheet 18.1. (Do not round intermediate calculations. Round your answer to 1 decimal place.)

a. How much external capital will the company require in 2021?

b. What will be the companys debt ratio at the end of 2021? (Round your answer to 2 decimal places.)

A Long-Term Planning Model for Growth Industries Income Statement 2017 2018 2019 2020 2021 Revenue Cost of goods sold EBIT Interest expense Earnings before taxes Taxes at 50% Net income Dividends Reinvested earnings 380.0 240.0 140.0 28.0 112.0 56.0 56.0 16.8 39.2 Balance Sheet (year-end) Assets Net working capital Net fixed assets Total assets 36.0 320.0 356.0 Liabilities and equity Long-term debt Shareholders' equity Total liab. & share. equity 280.0 76.0 356.0 Sources and Uses of Funds Operating cash flow Increase in working capital Investments in fixed assets Dividends Total uses of cash Required external financing Financial Ratios Debt ratio 0.79 0.71 0.64 0.58 0.53 Interest coverage 5.0 6.0 6.7 7.4 8.1