Using the data in the table :

1) forecast the 2018 Pro forma Financial Statements for Company C using the % of Sales Method assuming: a) sales increase by 20%, from 2017 to 2018, as do all other operating accounts on the balance sheet, except the company must increase Fixed Assets to $50,000 to support the higher level of production; b) all external funds needed (EFN) will come from additional debt, c) the $ amount of the dividend payment in 2018 will remain the same as in 2017, and d) the effective tax rate and the rate of interest on debt will remain unchanged from 2017. 2) Based on just 2 iterations, what is your forecast the $ amount of debt and the debt/equity ratio Co. C will require to support this growth.

Income Statement Iteration 1 Iteration 2 2017 | % of Sales 2018 2018 100 Interest Expense Profit bef. Taxes Taxes Net Income 12 Tax Rate 0.4 Int. Rate 0.125 Balance Sheet Iteration 1 Iteration 2 2017 | % of Sales 2018 2018 15 15 Fixed Assets Total 15 Forecast Addn to R