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.
Blockbuster Inc.
Income Statement and Balance Sheet
As of December 31, Year 2 ($000's)
\(\begin{array}{|c|c|c|c}
\hline & \text { Year } 2 & \text { Ratios } & \text { Forecast } \
\hline \text { Revenue } & \$ 5,157,600 & & \$ 5,673,360 \
\hline \text { COGS } & 2,420,700 & 0,469346 & \
\hline \text { SG\&A } & 2,708,500 & 0.525147 & \
\hline \text { Dep. Exp. } & 246,600 & & \
\hline \text { EBIT } & -218,200 & & \
\hline \text { Int. Exp. } & 78,200 & & \
\hline \text { Income Before Tax } & -296,400 & & \
\hline \text { Income Taxes } & -56,100 & & \
\hline \text { Net Income } & -\$ 240,300 & & \
\hline \text { ASSETS } & & & \
\hline \text { Total Current Assets } & 716,400 & 0.138902 & \
\hline \text { PP \&E } & 909,000 & & \
\hline \text { Goodwill } & 6,127,000 & & 6,127,000 \
\hline \text { Total Assets } & \$ 7,752,400 & & \
\hline \text { LIABILITIES AND } & & & \
\text { OWNR'S EQUITY } & & & \
\hline \text { Total Current Liabilities } & 1,268,800 & 0,246006 & \
\hline \text { Long Term Debt } & 734,900 & & \
\hline \text { Total Liabilities } & \$ 2,003,700 & & \
\hline \text { Owner's Equity } & & & \
\hline \text { Common Stock } & 6,075,800 & & 6,075,800 \
\hline \text { Retained Earnings } & -327,100 & & \
\hline \text { Total Stockholder Equity } & 5,748,700 & & \
\hline \text { Total Liabilities and } & & & \
\text { Owner's Equity } & 7,752,400 & & \
\hline
\end{array}\)
What are the additional funds needed in Year 3?

Question

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.
Blockbuster Inc.
Income Statement and Balance Sheet
As of December 31, Year 2 ($000's)
\(\begin{array}{|c|c|c|c}
\hline & \text { Year } 2 & \text { Ratios } & \text { Forecast } \
\hline \text { Revenue } & \$ 5,157,600 & & \$ 5,673,360 \
\hline \text { COGS } & 2,420,700 & 0,469346 & \
\hline \text { SG\&A } & 2,708,500 & 0.525147 & \
\hline \text { Dep. Exp. } & 246,600 & & \
\hline \text { EBIT } & -218,200 & & \
\hline \text { Int. Exp. } & 78,200 & & \
\hline \text { Income Before Tax } & -296,400 & & \
\hline \text { Income Taxes } & -56,100 & & \
\hline \text { Net Income } & -\$ 240,300 & & \
\hline \text { ASSETS } & & & \
\hline \text { Total Current Assets } & 716,400 & 0.138902 & \
\hline \text { PP \&E } & 909,000 & & \
\hline \text { Goodwill } & 6,127,000 & & 6,127,000 \
\hline \text { Total Assets } & \$ 7,752,400 & & \
\hline \text { LIABILITIES AND } & & & \
 \text { OWNR'S EQUITY } & & & \
\hline \text { Total Current Liabilities } & 1,268,800 & 0,246006 & \
\hline \text { Long Term Debt } & 734,900 & & \
\hline \text { Total Liabilities } & \$ 2,003,700 & & \
\hline \text { Owner's Equity } & & & \
\hline \text { Common Stock } & 6,075,800 & & 6,075,800 \
\hline \text { Retained Earnings } & -327,100 & & \
\hline \text { Total Stockholder Equity } & 5,748,700 & & \
\hline \text { Total Liabilities and } & & & \
\text { Owner's Equity } & 7,752,400 & & \
\hline
\end{array}\)
 What are the additional funds needed in Year 3?

Quizplus · Accepted Answer

The Answer of 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.
Blockbuster Inc.
Income Statement and Balance Sheet
As of December 31, Year 2 ($000's)
\(\begin{array}{|c|c|c|c}
\hline & \text { Year } 2 & \text { Ratios } & \text { Forecast } \
\hline \text { Revenue } & \$ 5,157,600 & & \$ 5,673,360 \
\hline \text { COGS } & 2,420,700 & 0,469346 & \
\hline \text { SG\&A } & 2,708,500 & 0.525147 & \
\hline \text { Dep. Exp. } & 246,600 & & \
\hline \text { EBIT } & -218,200 & & \
\hline \text { Int. Exp. } & 78,200 & & \
\hline \text { Income Before Tax } & -296,400 & & \
\hline \text { Income Taxes } & -56,100 & & \
\hline \text { Net Income } & -\$ 240,300 & & \
\hline \text { ASSETS } & & & \
\hline \text { Total Current Assets } & 716,400 & 0.138902 & \
\hline \text { PP \&E } & 909,000 & & \
\hline \text { Goodwill } & 6,127,000 & & 6,127,000 \
\hline \text { Total Assets } & \$ 7,752,400 & & \
\hline \text { LIABILITIES AND } & & & \
 \text { OWNR'S EQUITY } & & & \
\hline \text { Total Current Liabilities } & 1,268,800 & 0,246006 & \
\hline \text { Long Term Debt } & 734,900 & & \
\hline \text { Total Liabilities } & \$ 2,003,700 & & \
\hline \text { Owner's Equity } & & & \
\hline \text { Common Stock } & 6,075,800 & & 6,075,800 \
\hline \text { Retained Earnings } & -327,100 & & \
\hline \text { Total Stockholder Equity } & 5,748,700 & & \
\hline \text { Total Liabilities and } & & & \
\text { Owner's Equity } & 7,752,400 & & \
\hline
\end{array}\)
 What are the additional funds needed in Year 3?

Blockbuster Is a North American Video and DVD Sales and Rental