Net sales $4,700 Cash $ 840 Accounts payable $ 790

Less: Cost of goods sold 2,950 Accounts rec. 650 Long-term debt 3,130

Less: Depreciation 800 Inventory 520 Common stock 2,780

Earnings before interest and taxes 950 Total $2,010 Retained earnings 1,190

Less: Interest paid 310 Net fixed assets 5,880

Taxable Income $ 640 Total assets $7,890 Total liab. & equity $7,890

Less: Taxes 220

Net income $ 420

Dividends $125

1. Assume this firm is operating at 80 percent of capacity. What is the amount of the full-capacity level of sales?

2. Assume the firm has a constant dividend payout ratio and a constant debt-equity ratio. What is the

maximum growth rate the firm can achieve without any external equity financing?

3. Assume the firm has a constant dividend payout ratio and profit margin. Given these conditions, what is the maximum rate at which the firm can grow if they are currently at full capacity and do not want any external financing of any kind?

4. Assume the firm has a constant dividend payout ratio and a projected sales increase of 12 percent. All costs, assets, and current liabilities vary directly with sales. The firm is currently at full production. What is the external financing need?

5. Assume the profit margin is projected to increase to 9 percent while the dividend payout ratio remains constant. If sales increase by 12 percent, what is the projected total retained earnings?