VS has experienced rapid growth over the past several years.Sales are expected to grow @11% per annum for the next three years.

Asset growth has been financed by internal funds as well as the increased use of debt. At the end of 2015 debt was restructured with a new 7-year loan with principal payments of $1m per year and an interest rate of 6%.

VS working capital line (notes payable) was increased to a maximum of 3.5 million in 2015. Interest was charged @6% VS would like to keep its line of credit at $2.5 million.

VS is planning to pay out dividends of $600,000 per annum.

Assume Gross Fixed Assets will be 24% of Revenue and Depreciation will be 2.00% of Revenue.

Cash balances will be kept at around $300,000 and the firm has a 30% tax rate.

Build formulas for the worksheet rather than copying from the DEMO we did in class. No two firms are the same. Building the worksheet will generate a better understanding of the forecasting process.

1. Common Size Statements (%age of Sales) for both I/S & B/S.

2. pro-forma statements (I/S and B/S) for VS and determine their need for funds for the years 2018-2020.

3. Assume VS has a cost of capital of 10%. Is VS expected to have satisfactory financial performance in 2018.

4. What would happen to VS's profit, need for funds and ROIC if A/R was decreased to 63 days and A/P was increased to 50 days for the period 2018-2020.

5. If expected sales growth fell to 7% in 2018 through 2020 per annum what would be VS's need for funds using your assumptions from question 2?