1. 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 ($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?

   	a.	-$225.363 million
   	b.	$63.243 million
   	c.	$125.363 million
   	d.	$189.900 million
   	e.	$299.990 million