Using the spreadsheet information presented next, and the modified equations determined in question 8 earlier, extend the forecast for R&E Supplies contained in Table 3.5 through 2019.
What is R&E's projected external financing required in 2019? How does this number compare to the 2018 projection?
Perform a sensitivity analysis on this projection. How does R&E's projected external financing required change if the ratio of cost of goods sold to net sales declines from 86.0 percent to 84.0 percent?
Perform a scenario analysis on this projection. How does R&E's projected external financing required change if a severe recession occurs in 2019? Assume net sales decline 5 percent, cost of goods sold rises to 88 percent of net sales due to price cutting, and current assets increase to 35 percent of net sales as management fails to cut purchases promptly in response to declining sales.
R&E SUPPLIES
Facts and assumptions ($ thousands)
	Actual	Forecast	Forecast
	2017	2018	2019
Net sales	$20,613
Growth rate in sales		25%	30%
Cost of goods sold/net sales		86%	86%
Gen., sell., and admin. expense/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	$1,730
INCOME STATEMENT ($ thousands)
		Forecast	Forecast
Year		2018	2019
Net sales		$25,766
Cost of goods sold		22,159
Gross profit		3,607
General, selling, and administrative expense		3,092
Interest expense		231
Earnings before tax		285
Tax		128
Earnings after tax		156
Dividends paid		78
Additions to retained earnings		78
BALANCE SHEET (thousands)
Current assets		$7,472
Net fixed assets		280
Total assets		7,752
Current liabilities		3,736
Long-term debt		660
Equity		1,808
Total liabilities and owners' equity		6,204
External funding required		$1,548