Blockbuster is a North American video and DVD sales and rental chain. Forecast the financial statements for Blockbuster for Year 3. Use the percent of sales method based on Year 2 and the assumptions listed below. Please note the ratios to sales provided in the table which are useful for making the forecast. In the event that taxable income is negative, calculate taxes in the usual way. Negative taxes can be interpreted as a tax refund.
Sales growth of 10%. The cost of debt is 7.5%. The tax rate is 35%. The depreciation rate is 25%. CAPEX is $200M. The following accounts are held constant: Goodwill and Common Stock. Long Term Debt is the PLUG account. No dividends.
Income Statement and Balance Sheet |
As of December 31, Year 2 ($000s) |
| Year 2 | Ratios | Forecast |
Revenue | $5,157,600 | | $5,673,360 |
COGS | 2,420,700 | 0.469346 | |
SG&A | 2,708,500 | 0.525147 | |
Dep. Exp. | 246,600 | | |
EBIT | -218,200 | | |
Int. Exp. | 78,200 | | |
Income Before Tax | -296,400 | | |
Income Taxes | -56,100 | | |
Net Income | -$240,300 | | |
ASSETS | | | |
Total Current Assets | 716,400 | 0.138902 | |
PP&E | 909,000 | | |
Goodwill | 6,127,000 | | 6,127,000 |
Total Assets | $7,752,400 | | |
LIABILITIES AND OWNERS EQUITY | | | |
Total Current Liabilities | 1,268,800 | 0.246006 | |
Long Term Debt | 734,900 | | |
Total Liabilities | $2,003,700 | | |
Owners Equity | | | |
Common Stock | 6,075,800 | | 6,075,800 |
Retained Earnings | -327,100 | | |
Total Stockholder Equity | 5,748,700 | | |
Total Liabilities and Owners Equity | 7,752,400 | | |
What are the additional funds needed in Year 3?
▸ -$225.363 million
▸ $63.243 million
▸ $125.363 million
▸ $189.900 million
▸ $299.990 million