1. You have the following information for Sys Engine, a network security firm for the current year (Y0).

Income Statement (M$)	Y0	Y1
Sales	1400
Cost of Goods Sold	800
Selling, General and Administrative Expenses (SG&A)	200
Depreciation	100
Earnings Before Interest & Tax (EBIT)	300
Interest Expense	40
Earnings Before Tax	260
Taxes (25%)	65
Net Income	195
Dividends	150

Balance Sheet (M$)	Y0	Y1
Cash	100
Accounts Receivable	300
Inventories	500
Current Assets	900
Gross Property, Plant and Equipment (PPE)	400
Accumulated Depreciation	300
Net Fixed Assets (Net PPE)	100
TOTAL ASSETS	1,000
Accruals	25
Accounts Payable	150
Notes Payable	75
Current Liabilities	250
Long Term Debt	350
Common Stock	100
Retained Earnings	300
Total Liability & Equity	1,000

1. The net profit margin is 13.9%; total asset turnover is 1.4; financial leverage (Total Assets/Equity) is 2.5 and return on equity is 49% for Y0. If the industry has a net profit margin of 10%, a total asset turnover of 1.50 and financial leverage of 2, what conclusions can you make about Sys Engine?

2. Forecast the income statement and balance sheet for Y1. Sales and accounts receivable grow by 25%; cost of goods sold, inventory and accounts payable grow 20%; and SG&A grows 10%. Depreciation expense will be 120M. Interest expense will fall to 30M. The following accounts will not change (same dollar amount): dividends, cash, accruals, notes payable, long-term debt, common stock. They need 150M more in gross PPE. Find the additional funds needed.