Facts and Assumptions
Year	2014	2015	2016
Net sales	$20,613
Growth rate in sales		25%	30%
Cost of goods sold/net sales		86%	86%
Gen., sell,, and admin. expenses/net sales		12%	11%
Long-term debt	$ 760	$ 660	$ 560
Current portion long-term debt	$ 100	$ 100	$ 100
Interest rate		10%	10%
Tax rate		45%	45%
Dividend/earnings after tax		50%	50%
Current assets/net sales		29%	29%
Net fixed assets		$ 280	$ 270
Current liabilities/net sales		14.5%	14.4%
Owners' equity	$ 1,730
INCOME STATEMENT
Year	2014	Forecast 2015	2016
Net sales		$25,766	$33,496
Cost of good sold		22,159	28,807
Gross profit		3,607	4,689
Gen., sell,, and admin. exp.		3,092	3,685
Interest expense		231	231
Earnings before tax		285	773
Tax		128	348
Earnings after tax		156	425
Dividends paid		78	213
Additions to retained earnings		78	213
BALANCE SHEET
Current assets		$ 7,472	$ 9,714
Net fixed assets		280	270
Total assets		7,752	9,984
Current liabilities		3,736	4,823
Long-term debt		660	560
Equity		1,808	2,021
Total liabilities and shareholders' equity		6,204	7,404
EXTERNAL FUNDING REQUIRED		$ 1,548	$ 2,580

1. Peform a sensitivty analysis on this projection. How does R&E's projected external financing required change is the ratio of cost of goods sold to net sales declines from 86%?

2. Perform a scenario analysis on this projection. How does R& E's projected external financing required change is a severe recession occurs in 2016? Assume net sales decline 5%, cost of goods sold rises to 88% of net sales due to price cutting, and current assets increase 35% of the net sales as management fails to cut purchases promptly in response to declining sales.