The most recent statement of financial position and statement of comprehensive income of Hopeful Inc. are shown here:

Statement of Financial Position
	Recent		Recent
ASSETS		LIABILITIES & OWNERS’ EQUITY
Current Assets		Current Liabilities
Cash	$1,500	A/P	$2,000
A/R	2,500	Notes/Pay.	3,000
Inventory	2,000	Total	5,000
Total	6,000	LT Debt	2,000
Fixed Assets		Owners’ Equity
Net PP&E	8,000	Com Shares	2,900
Total Assets	14,000	RE	4,100
		Total	7,000
		Total L & OE	14,000

Statement of Comp. Income
Sales	7,600
Costs	3,000
Interest	1100
EBT	3500
Taxes (40%)	1,400
Net Income	2,100
Dividends	700
Add. To RE	1400

Required:

1. Generate the pro forma statements for the next year based on the assumption that the growth rate is 15%. What is the external financing needed? Assume the plan is to keep the retention rate constant, the costs, the A/P, and the fixed assets, and the current assets grow at the same rate as the Sales growth rate, which is 15%. The firm is operating at full capacity and no new debt or equity is issued, and the interest expense will remain constant.
2. Recalculate the EFN with the assumption that the Sales growth rate will be 25%. What is the internal growth rate? (If your solution is correct, a 0.2% error is acceptable) Explain why we cannot use the internal growth rate formula.