Lesson #2, Assignment #4 - Chapter 4 Planning for Growth at...

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Chapter 4 Planning for Growth at S&S Air Input area: Sales $30,499,420 COGS 22,224,580 Other expenses 3,867,500 Depreciation 1,366,680 EBIT $3,040,660 Interest 478,240 Taxable income $2,562,420 Taxes (40%) 1,024,968 Net income $1,537,452 Dividends $560,000 Add to RE $977,452 Assets Liabilities & Equity Current Assets Current Liabilities Cash $441,000 Accounts Payable $889,000 Accounts rec. 708,400 Notes Payable 2,030,000 Inventory 1,037,120 Total CL $2,919,000 Total CA $2,186,520 Long-term debt $5,320,000 Fixed assets Net PP&E $16,122,400 Shareholder Equity Common stock $350,000 Retained earnings 9,719,920 Total Equity $10,069,920 Total Assets $18,308,920 Total L&E $18,308,920 Growth rate 12% Minimum FA purchase $5,000,000 Output area: Return on assets 8.40% Return on equity 15.27% Retention ratio 0.64 Internal growth rate 5.64% <<< Question 1-A Sustainable growth rate 10.75% <<< Question 1-B Sales $34,159,350 COGS 24,891,530 Other expenses 4,331,600 Depreciation 1,366,680 EBIT $3,569,541 Interest 478,240 Taxable income $3,091,301 Taxes (40%) 1,236,520 Net income $1,854,780 Question 1-C: What do the results above (Q1-A and Q1-B) mean?The internal growth rate is the growth rate the company can achieve with no outside financing of any sort. The
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