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The following data shows a company's income statement and balance sheet accounts, assuming a 4 0 % tax rate. Sales $ 4 6 , 2

The following data shows a company's income statement and balance sheet accounts, assuming a 40% tax rate.

Sales $46,298,115.00 

Retained earnings $12,717,254.00 

Other expenses $ 5,870,865.00 

Notes Payable $ 2,439,553.00 

Net PP&E $20,381,945.00 

Long-term debt $ 6,300,000.00 

Inventory $ 1,235,161.00 

Interest $ 725,098.00 

Dividends $ 705,000.00 

Depreciation $ 2,074,853.00 

Common stock $ 460,000.00 

COGS $34,536,913.00 

Cash $ 524,963.00 

Accounts Receivable $ 843,094.00 

Accounts Payable $ 1,068,356.00 

You are required to do the following tasks:

1-Calculate the internal growth rate and sustainable growth rate for the company. What do these numbers mean?

2-The company plans to grow by 12% next year at full capacity. Calculate EFN and determine if sales can support growth.

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 company 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?

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