The 2021 financial statements for Super Growth Industries are presented below. Sales and costs are projected to grow at 30% a year for at least the next 4 years. Both current assets and account payable are projected to rise in proportion to sales. Assume that 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 outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60. Construct a spreadsheet model for the firm. For questions b) to e), assume that the only change from the baseline is the one stated in the question.

a) What would be the company's debt ratio and interest coverage in 2025? b) Now assume that the firm due to their incredible growth rate has decided to not pay any dividends and reinvest all of their earnings. What would be in this case the company's debt ratio and interest coverage in 2025?

c) Assume that the firm is not operating at full capacity, so until 2023 they do not have to increase their fixed assets, in 2024 the firm would need an extra factory, so its fixed assets will double then, and stay at that level in 2025. What would be in this case the company's debt ratio and interest coverage in 2025?

d) Now consider that current assets and accounts payable do not increase at the same pace than sales, they only grow by 20% a year. What would be in this case the company's debt ratio and interest coverage in 2025?

e) Imagine that at the beginning of 2023, the firm introduces an innovation in production that allows the firm to reduce its costs to 60% of sales. What would be in this case the company's debt ratio and interest coverage in 2025?

f) Comment about the changes in general from the pervious results (which are more realistic, areas the firm should concentrate on, viability on the long-term of the chosen strategy,...). Open ended question. INCOME STATEMENT 2021 Sales 150,000 Costs (80% Sales) 120,000 EBIT 30,000 Interest Expense 10,000 Taxable Income 20,000 Taxes (21%) 4,200 Net Income 15,800 Dividends 9,480 Addition to Retained Earnings 6,320 BALANCE SHEET, YEAR-END, 2021 Assets Liabilities Current Assets Current Liabilities Cash 5,000 Accounts Payable 25,000 Accounts Receivable 15,000 Total Current Liabilities 25,000 Inventories 15,000 Long-Term Debt 100,000 Total Current Assets 35,000 Stockholders Equity 100,000 New Plant and Equipment 190,000 Total Assets 225,000 Total Liabilities plus Equity 225,000

INCOME STATEMENT 2021
Sales		150,000
Costs (80% Sales)		120,000
EBIT		30,000
Interest Expense		10,000
Taxable Income		20,000
Taxes (21%)		4,200
Net Income		15,800
Dividends	9,480
Addition to Retained Earnings	6,320

BALANCE SHEET, YEAR-END, 2021
Assets		Liabilities
Current Assets		Current Liabilities
Cash	5,000	Accounts Payable	25,000
Accounts Receivable	15,000	Total Current Liabilities	25,000
Inventories	15,000	Long-Term Debt	100,000
Total Current Assets	35,000	Stockholders Equity	100,000
New Plant and Equipment	190,000
Total Assets	225,000	Total Liabilities plus Equity	225,000