Q9 Networks is a leading provider of outsourced data center infrastructure such as web-servers and data storage. Forecast the financial statements for Q9 Networks for Year 6

Question

Use the percent of sales method based on Year 5 and the assumptions listed below. Please note the ratios to sales provided in the table which are useful for making the forecast. Forecast the financial statements for Q9. What is the change in the cash account from Year 5 to Year 6?
Sales growth of 20%. The cost of debt is 4%. The Tax rate is 35%. The depreciation rate is 5%. CAPEX is $4,000,000. Cash is the plug account. The following accounts are held constant: Long-term debt and Common Stock. No dividends are paid in Year 6.

Q9 Networks
Income Statement and Balance Sheet
As of December 31, Year 5 ($ 000's)
Year 5 Ratios Year 6
Revenue $37,829 $45,395
COGS 25,840 0.683074
SG&A 11,163
Dep. Exp. 535
EBIT 291
Int. Exp. 136
EBT 155
Provision for Income Taxes 55
Net Income 100
Assets Year 5 Year 6
Cash 71,301
Other Current Assets 5,046 0.133390
Total Current Assets 76,347
PP&E 36,757
Total Assets 113,104
Liabilities & Stockholders' Equity
Total Current Liabilities 7,688 0.203230
Long-Term Debt 4,091 4,091
Total Liabilities 11,779
Shareholders' Equity
Common Stock 178,328 178,328
Retained Earnings -77,003
Total Owner's Equity 101,325
Total Liabilities and Owner's Equity 113,104

A) $2.292 million
B) $1.301 million
C) -$2.220 million
D) -$6.702 million
E) -$7.081 million

Answer 1

C