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. 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)
\(\begin{array}{|c|c|c|c|}
\hline& \text { Year 5 } & \text { Ratios } & \text { Year 6 } \
\hline \text { Revenue } & \$ 37,829 & & \$ 45,395 \
\hline \text { COGS } & 25,840 & 0.683074 & \
\hline \text { SG\&A } & 11,163 & & \
\hline \text { Dep. Exp. } & 535 & & \
\hline \text { EBIT } & 291 & & \
\hline \text { Int. Exp. } & 136 & & \
\hline \text { EBT } & 155 & & \
\hline \text { Provision for Income Taxes } & 55 & & \
\hline \text { Net Income } & 100 & & \
\hline \text { Assets } & \text { Year } 5 & &\text { Year } 6 \
\hline \text { Cash } & 71,301 & & \
\hline \text { Other Current Assets } & 5,046 & 0.133390 & \
\hline \text { Total Current Assets } & 76,347 & & \
\hline \text { PP\&E } & 36,757 & & \
\hline \text { Total Assets } & 113,104 & & \
\hline \text { Liabilities \& Stockholders' } & & & \
\text { Equity } & & & \
\hline \text { Total Current Liabilities } & 7,688 & 0.203230 & \
\hline \text { Long-Term Debt } & 4,091 & & 4,091\
\hline \text { Total Liabilities } & 11,779 & & \
\hline \text { Shareholders' Equity } & & & \
\hline \text { Common Stock } & 178,328 & &178,375 \
\hline \text { Retained Earnings } & -77,003 & & \
\hline \text { Total Owner's Equity } & 101,325 & & \
\hline \text { Total Liabilities and Owner's } & & & \
\text { Equity } & 113,104 & & \
\hline
\end{array}\)

Question

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. 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)
\(\begin{array}{|c|c|c|c|} 
\hline& \text { Year 5 } & \text { Ratios } & \text { Year 6 } \
\hline \text { Revenue } & \$ 37,829 & & \$ 45,395 \
\hline \text { COGS } & 25,840 & 0.683074 & \
\hline \text { SG\&A } & 11,163 & & \
\hline \text { Dep. Exp. } & 535 & & \
\hline \text { EBIT } & 291 & & \
\hline \text { Int. Exp. } & 136 & & \
\hline \text { EBT } & 155 & & \
\hline \text { Provision for Income Taxes } & 55 & & \
\hline \text { Net Income } & 100 & & \
\hline \text { Assets } & \text { Year } 5 & &\text { Year } 6 \
\hline \text { Cash } & 71,301 & & \
\hline \text { Other Current Assets } & 5,046 & 0.133390 & \
\hline \text { Total Current Assets } & 76,347 & & \
\hline \text { PP\&E } & 36,757 & & \
\hline \text { Total Assets } & 113,104 & & \
\hline \text { Liabilities \& Stockholders' } & & & \
\text { Equity } & & & \
\hline \text { Total Current Liabilities } & 7,688 & 0.203230 & \
\hline \text { Long-Term Debt } & 4,091 & & 4,091\
\hline \text { Total Liabilities } & 11,779 & & \
\hline \text { Shareholders' Equity } & & & \
\hline \text { Common Stock } & 178,328 & &178,375 \
\hline \text { Retained Earnings } & -77,003 & & \
\hline \text { Total Owner's Equity } & 101,325 & & \
\hline \text { Total Liabilities and Owner's } & & & \
\text { Equity } & 113,104 & & \
\hline
\end{array}\)

Quizplus · Accepted Answer

The change in cash is calculated by using the percent of sales method to forecast the financial statements and then using the cash flow statement to determine the change in cash. The plug account for cash results in a decrease of $2.220 million.

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