Outlaws is a general goods retail chain in the High Plains region. For

Outlaws is a general goods retail chain in the High Plains region. Forecast the financial statements for Outlaws for Year 7. Use the percent of sales method based on Year 6 and the assumptions listed below.

Please note the ratios provided in the table which are useful for making the forecast.
Sales growth of 5.5%. The cost of debt is 6.25%. The tax rate is 35%. The depreciation rate is 6%. CAPEX is $300 Million. The following accounts are constant: Goodwill and common stock. Long term debt is the PLUG variable. No dividends.
Forecast the financial statements for Outlaws. What are the additional funds needed (AFN) in Year 7? The AFN is the change in the plug account from Year 6 to Year 7.

Year 6 Ratios Forecast
Revenue $29,210 $30,817
COGS 22,152 0.758370
SG&A 5,245 0.179562
Dep. Exp. 621
EBIT 1,192
Int. Exp. 277
EBT 915
Inc Taxes 288
Net Income $627
ASSETS Year 6 Ratios Forecast
Total Current Assets $4,385 0.150120
PP&E 9,637
Goodwill 678 678
Total Assets $14,700
LIABILITIES AND OWNER’S EQUITY
Total Current Liabilities 3,651 0.124991
Long Term Debt 4,208
Total Liabilities $7,859
Owner’s Equity
Common Stock 1,192 1,192
Retained Earnings 5,089
Total Owner’s Equity 6,281
Total Liabilities & Owner’s Equity $14,700

A) -$381 million
B) -$290 million
C) -$91 million
D) $127 million
E) $189 million

ANSWER

A