Chapter 9: Projecting Financial Statements 1

Chapter 9

PROJECTING FINANCIAL STATEMENTS

DISCUSSION QUESTIONS AND ANSWERS

1. Why is it usually easier to forecast sales from seasoned firms in contrast with early-stage
ventures?

It is usually easier to forecast a seasoned firm’s sales compared to early-stage ventures because a
seasoned firm generally has an operating history. The forecast of the firm’s financials therefore could
begin with the firm’s historical sales and the past relationships between sales and the other asset and
liability accounts. Early-stage ventures have little or no useful historical operating performance
against which to benchmark. Competitors’ operating histories, however, may provide a useful
reference. Nonetheless, when a venture is the pioneer in an industry, it is especially difficult to
forecast its financials, since there are no historical or competitor benchmarks to act as a guide to the
projections.

2. Explain how projected economic scenarios can be used to help forecast a firm’s sales growth
rate.

Since future state of the economy cannot be known, sales forecasts should be based on
specific macroeconomic scenarios that reflect expected values based on probabilities
assigned to possible outcomes.

3. Identify and describe the four-step process typically used to forecast sales for seasoned firms.

Forecasting sales or revenues for a firm that has been in operation for a number of years
usually begins with a review of the firm’s sales for the past several years. Typically, a five-
year period is used, if possible. The four steps are : (1) forecast future growth rates based
upon multiple scenarios and their likelihoods; (2) check the results of the first step with
industry growth rates and expected market shares – the “top-down” or “market-share-driven”
approach to projecting growth rates; (3) refine the sales forecast using direct contact with
existing and potential customers – the “bottom-up” or “customer-driven” approach to
projecting growth rates; and (4) consider the likely impact of major strategic changes
including changes in pricing policy, credit policies, marketing approach and R&D
developments and strategy.

4. What are the three steps typically used to forecast sales for early-stage ventures?

A new venture usually begins its forecast with a “top-down” market-driven approach. First,
an estimate is made of what the overall industry or market demand is likely to be next year
and over the following four years. The second step is to estimate a market share that the
venture believes it could attain. The third step should be an attempt to further refine the sales
forecast by working with existing and potential customers.

5. Describe the general relationship between the life cycle stage and the ability to accurately
forecast sales for a firm.
2 Chapter 9: Projecting Financial Statements

Venture capitalists and other seasoned investors know that forecasting sales usually gets
easier as a firm matures. See Figure 9.4. Sales forecasting accuracy is usually low during
the development stage, low to moderate during the startup stage, moderate during the
survival stage, moderate to high during the rapid-growth stage, and high during the maturity
stage.

6. How do venture investors adjust for the belief that entrepreneurs tend to be overly optimistic
in their sales forecasts?

Entrepreneurs tend to be exceedingly optimistic in their sales and cash flow forecasts.
Venture capitalists and other seasoned outside investors know that the ability to forecast
sales, and thus cash flows, accurately, tends to be inversely related to where the firm is in its
life cycle. In general, the more difficult it is to forecast sales accurately, the greater the
venture’s riskiness. Venture capitalists and other seasoned outside investors will adjust for
this greater difficulty by adjusting the expected value of the entrepreneur’s sales forecasts
downwards or by using higher discount rates to value the venture’s cash flows.

7. What is meant by a sustainable sales growth rate?

The sustainable sales growth rate is the rate at which a venture can grow based on its
retention of profits. In other words, assuming that a venture replicates itself in all aspects and
does not distribute any returns to investors, the venture can grow at the accounting rate of
return on equity where the equity base is measured at the beginning of a period.

8. Identify and describe the two equations that can be used to estimate a firm’s sustainable
growth rate.

A firm’s sustainable growth rate ‘g’ can be calculated by:

Ending Equity  Beginning Equity Change In Equity ΔE

g  
Beginning Equity Beginning Equity E beg

NI
g = E x RR
beg

The following expanded model which provides greater detail in terms of operating
performance and financial policy metrics also can be used:

g = (Net income/Net sales) x (Net sales/Total assets) x (Total assets/Beginning common

equity) x Retention rate

Where: Retention Rate = (1 – Cash dividends/Net income)

9. Describe the basic additional funds needed (AFN) equation.

The “additional funds needed” is the financial funds still needed to finance asset growth after
spontaneously generated funds and the increase in retained earnings have been used. It is
calculated by subtracting Spontaneously Generated Funds and the Increase in Retained
Earnings from the Required Increase in Assets.
 Chapter 9: Projecting Financial Statements 3

AFN = Required Increase in Assets – Spontaneously Generated Funds

– Increase in Retained Earnings

TA 0 AP0  AL0 NI 0
= (NS )  (NS )  ( NS1 ) ( RR0 )
NS 0 NS 0 NS 0

10. List the major sources of funds typically available to ventures that have successfully entered
into their rapid-growth life cycle stage.

Refer to Figure 9.6. The types of financing available during the rapid-growth life cycle stage
are: second-round financing, mezzanine financing, and liquidity-stage financing. The major
sources of financing during the rapid-growth stage are: business operations, suppliers and
customers, commercial banks, and investment banks.

11. Explain how the AFN equation can be used to forecast the amount of funds that will be
needed over a several year period.

To use the AFN equation to forecast the amount of the funds needed over a several year
period, one must estimate the venture’s asset intensity. This provides an estimate of the
relationship between sales growth and required assets. The asset intensity is reduced by the
amount of funds that can be obtained spontaneously, or from vendors and other sources of
working capital. Finally, the AFN is also reduced by the earnings that the venture is able to
retain. All three terms of the AFN equation can be estimated to forecast the venture’s
required funding.

12. What is the percent of sales forecasting method?

The percent of sales forecasting method makes the projections based on the assumption that
certain costs and selected balance sheet items are best modeled as a percentage of sales. This
method naturally leads to a model of the mature firm that, in all of its aspects, grows at a
smooth rate.

13. After forecasting sales, describe how the income statement is projected.

Once one has projected sales, one can project the income statement by modeling the costs as
fixed costs, semi-fixed costs, and variable costs, expressing them as a percent of sales.
Typically, the cost of goods sold and marketing expenses vary directly with changes in sales.
Other expenses such as G&A may be fixed over a certain range of sales, but will vary with
the venture’s scale (sales) in the long run.

14. Describe how balance sheets are projected once a sales forecast has been made.

The balance sheet projection typically separates into Asset Projections and Liabilities and
Equity Projections. The Asset forecast is usually consistent with estimating the necessary
increase in total assets in the AFN model. It is expected that an increase in assets is required
to support the increase in sales. Each item on the balance sheet is then expressed as a
percentage of sales. While in the short run, this percent of sales may vary as the venture
gains efficiencies, in the long run it will settle to a level consistent with mature firm sales
4 Chapter 9: Projecting Financial Statements

growth. The projections in the liabilities and equity side of the balance sheet include the
financing provided spontaneously through trade credit and accrued liabilities and
incorporates retained earnings from the projected income statement. The AFN then can be
thought of as a “plug” that makes the total liabilities and equity equal to the firm’s total
assets.

15. What role does the statement of cash flows play in long-term financial planning?

Most long­term financial planning efforts set cash as a percentage of sales or as a fixed dollar
amount for planning purposes. Thus, the statement of cash flows is primarily used as a 
“check” on the projected income statement and projected balance sheet. A complete balance 
sheet and income statement mechanically imply a working statement of cash flows.

The projected cash flow statement alternatively could be used as a dynamic forecasting 
financial statement. 

16. From the Headlines – Chipotle: Describe how cash budgets and projected financial
statements could be used in estimating how far $360 million could take Chipotle after its first
14 restaurants.

Answers will vary: With several restaurants in operations, projected financial statements
begin to take on more credibility. They also allow for the notion of “comparable stores”
where we can get a pretty good idea what a prototypical store’s operating behavior looks like
during its regular operating (non-startup) years. With this increase in credibility, we can
project revenues and expenses forward with more accuracy and provide a useful analysis of
how far $360 million will take the firm. As it grows, existing stores mature, new store capital
investment and startup costs are incurred, and all of this gets netted together to project the
drain on an existing stockpile of $360 million in cash.

EXERCISES/PROBLEMS AND ANSWERS

1. [Sales Growth Rates, Sales, and Profits] Petal Providers Corporation opens and operates
“mega” floral stores in the U.S. The idea behind the super store concept is to model the U.S.
floral industry after its European counterparts whose flower markets generally have larger
selections at lower prices. Revenues were $1 million with net profit of $50,000 last year
when the first “mega” Petal Providers floral outlet was opened. If the economy grows
rapidly next year, Petal Providers expects its sales to growth by 50 percent. However, if the
economy exhibits average growth, Petal Providers expects a sales growth of 30 percent. For
a slow economic growth scenario, sales are expected to grow next year at a 10 percent rate.
Management estimates the probability of each scenario occurring to be: rapid growth (.30);
average growth (.50), and slow growth (.20). Petal Providers net profit margins are also
expected to vary with the level of economic activity next year. If slow grow occurs, the net
profit margin is expected to be 5 percent. Net profit margins of 7 percent and 10 percent are
expected for average and rapid growth scenarios, respectively.

A. Estimate the average sales growth rate for Petal Providers for next year.
 Chapter 9: Projecting Financial Statements 5

Average sales growth rate = Rapid growth rate x Rapid probability

+ Average growth rate x Average probability
+ Slow growth rate x Slow probability
= (.50 x .30) + (.30 x .50) + (.10 x .20) = 32%

B. Estimate the dollar amount of sales expected next year under each scenario, as well as
the expected value sales amount.

Sales with rapid growth = 1,000,000 x (1 + 50%) = 1,500,000

Sales with average growth = 1,000,000 x (1 + 30%) = 1,300,000
Sales with slow growth = 1,000,000 x (1 +10%) = 1,100,000
Expected value sales = 1,000,000 x (1 + 32%) = 1,320,000

C. Estimate the dollar amount of net profit expected next year under each scenario, as well
as the expected value net profit amount.

Net profit with rapid growth = 1,500,000 x 10% = 150,000

Net profit with average growth = 1,300,000 x 7% = 91,000
Net profit with slow growth = 1,100,000 x 5% = 55,000
Expected value net margin = (.10 x .30) + (.07 x .50) + (.05 x .20) = 7.5%
Expected value net profit = 1,320,000 x 7.5% = 99,000

2. [Sustainable Sales Growth Rates] Petal Providers Corporation, described in Problem 1, is

interested in estimating its sustainable sales growth rate. Last year revenues were $1
million, the net profit was $50,000, the investment in assets was $750,000, payables and
accruals were $100,000, and equity at the end of the year was $450,000 (i.e., beginning of
year equity of $400,000 plus retained profits of $50,000). The venture did not pay out any
dividends and does not expect to pay dividends for the foreseeable future.

A. Estimate the sustainable sales growth rate for Petal Providers based on the
information provided in this problem.

E Ending  E Beginning 450,000  400,000

g=   12.5%
E Beginning 400,000

Or: g = (Net Income/Common equity beginning) x Retention rate

= 50,000/400,000 x 1.00 = .125 x 1.00 = .125 = 12.5%

Expanded model solution:

g = 50,000/1,000,000 x 1,000,000/750,000 x 750,000/400,000 x 1.0000

= .0500 x 1.3333 x 1.8750 x 1.0000 = .0667 x 1.8750 = 12.5%

B. How would your answer in Part A change if economic growth is average and Petal
Providers’ net profit margin is 7 percent?

Note (Historical View): The 12.5% sustainable growth rate in Part A is based on last
year’s operating performance and financial policy relationships holding for this year. If
6 Chapter 9: Projecting Financial Statements

we just revise last year’s operating and financial relationships to reflect a net profit
margin increase from 5% to 7%, we would have:

Net income = 1,000,000 x .07 = 70,000

Other operating performance and financial policy relationships are assumed to
remain the same

g = [(400,000 + 70,000) – 400,000]/400,000 = 70,000/400,000 = .175 = 17.5%

Note (Forward-Looking View): If sales grow at 30% this year to $1,300,000 ($1,000,000
x .30) based on information in Problem 5, Petal Providers will need to improve its
operating performance, change its financial policies, and/or obtain additional equity funds
to support the “gap” between a forecasted growth rate of 30% and the 12.5% sustainable
growth rate calculated in Part A.

Looking forward and assuming the 30% sales growth rate can be funded this year and the
asset turnover ratio will remain the same, the sustainable sales growth rate for next year
can be estimated as follows:

Expected sales = 1,000.000 x 1.30 = 1,300,000

Expected net income = 1,300,000 x 7% = 91,000
Expected total assets = 750,000 x 1.30 = 975,000
Expected retained profit = 91,000 x 1.0000 = 91,000
Beginning equity this year (last year’s ending equity) = $450,000

g = [(450,000 + 91,000) – 450,000]/450,000 = 91,000/450,000 = .2022 = 20.22%

Or: g = 91,000/450,000 x 1.00 = .2022 x 1.00 = .2022 = 20.22%

Expanded model solution:

g = 91,000/1,300,000 x 1,300,000/975,000 x 975,000/450,000 x 1.0000

= .0700 x 1.3333 x 2.1667 x 1.0000 = .0933 x 2.4375 = .2022 = 20.22%

3. [Additional Funds Needed] Petal Providers Corporation, described in Problem 1, is

interested in estimating its additional financing needs to support a rapid increase in sales
next year. Last year revenues were $1 million, the net profit was $50,000, the investment in
assets was $750,000, payables and accruals were $100,000, and equity at the end of the year
was $450,000. The venture did not pay out any dividends and does not expect to pay
dividends for the foreseeable future.

A. What would be your estimate of the additional funds needed next year to support a 30
percent increase in sales?

Forecasted Sales = 1,000,000 x 1.3 = 1,300,000

Change in Sales = 300,000

TA AP0  AL0 NI 0
AFN = (NS )  (NS )  ( NS1 ) ( RR0 )
NS 0 NS 0 NS 0
 Chapter 9: Projecting Financial Statements 7

= (750,000/1,000,000 x 300,000) – (100,000/1,000,000 x 300,000) –

(1,300,000 x 50,000/1,000,000) x 1.00
= (.75 x 300,000) – (.10 x 300,000) – (1,300,000 x .05) x 1.00
= 225,000 – 30,000 – 65,000
= 130,000

B. How would your answer in Part A change if the expected sales growth were only 15
percent?

Forecasted Sales = 1,000,000 x 1.15 = 1,150,000

Change in Sales = 150,000

AFN = (750,000/1,000,000 x 150,000) – (100,000/1,000,000 x 150,000) –

(1,150,000 x 50,000/1,000,000) x 1.00
= (.75 x 150,000) – (.10 x 150,000) – (1,150,000 x .05) x 1.00
= 112,500 – 15,000 – 57,500
= 40,000

4. [Sustainable Sales Growth Rates and Additional Funds Needed] The Minoso Corporation
anticipates a 20 percent increase in sales for 2017 over its 2016 level. Minoso is currently
operating at full capacity and thus expects to increase its investment in both current and fixed
assets in order to support the increase in forecasted sales.

Minoso Corporation
Income Statement for December 31, 2016
(Thousands of Dollars)
_________________________________
Sales $15,000
Operating expenses -13,000
EBIT 2,000
Interest 400
EBT 1,600
Taxes (40%) 640
Net income 960
Cash dividends (40%) 384
Added retained earnings $576

Balance Sheet as of December 31, 2016

(Thousands of Dollars)
______________________________________________________________________________
Cash $ 1,000 Accounts payable $ 1,600
Accounts receivable 2,000 Bank Loan 1,800
Inventories 2,200 Accrued liabilities 1,200
Total current assets 5,200 Total current liabilities 4,600
Long-term debt 2,200
Fixed assets, net 6,800 Common stock 2,400
Total assets $12,000 Retained earnings 2,800
Total liabilities & equity $12,000
______________________________________________________________________________
8 Chapter 9: Projecting Financial Statements

A. Estimate Minoso’s sustainable sales growth rate based on the financial data relationships
for 2016. In making your estimate, calculate each component of the firm’s operating
performance and financial policies.

g = operating performance x financial policies = (net profit margin x asset turnover (or
ROA)) x [(total assets/beginning common equity) x (1 – dividend payout policy)
g = (960/15000) x (15000/12000) x (12000/(2400 + 2800 – 576)) x (1 - .40)
= .064 x 1.250 x 2.595 x .600 = .1246 = 12.46%

Note: the beginning equity is the ending equity of 5200 (2400 + 2800) less the additional
retained earnings of 576 which equals 4624).

B. Estimate the additional funds needed (AFN) for 2017 using the formula or equation
method that is based on constant “percent of sales” relationships.

2017 sales = 15000 x 1.20 = 18000; change in sales = 3000 (i.e., 18000 – 15000)

AFN = [(12000/15000) x 3000] – [((1600 + 1200)/15000) x 3000] – [18000 x

(960/15000) x (1 - .40)] = .800(3000) - .1867(3000) – 18000(.064)(.60) = 2400 -560.1 –
691.2 = 1148.7

C. Briefly describe differences in calculation assumptions between Part A and Part B.

The sustainable sales growth rate calculation assume a constant financial leverage policy
such that all forms of debt (current liabilities and long-term debt) will change with
changes in sales. The AFN equation assumes only accounts payables and accrued
liabilities will change with changes in sales. That is notes payable (bank loans) and long-
term debt changes must be negotiated and thus will not automatically change with sales.
Thus, if the 12.46% sustainable sales growth percentage is inserted in the AFN equation
(instead of 20%), the AFN will not be zero because of the differences in the financial
leverage assumptions between the two equations.

5. [Sustainable Sales Growth Rates and Additional Funds Needed] Following are two years of
income statements and balance sheets for the Munich Exports Corporation.

Munich Exports Corporation

2015 2016
Cash $ 50,000 $ 50,000
Accounts receivable 200,000 300,000
Inventories 450,000 570,000
Total current assets 700,000 920,000
Fixed assets, net 300,000 380,000
Total assets $1,000,000 $1,300,000
Accounts payable 130,000 $ 180,000
Accruals 50,000 70,000
Bank loan 90,000 90,000
Total current liabilities 270,000 340,000
 Chapter 9: Projecting Financial Statements 9

Long-term debt 400,000 550,000

Common stock ($.05 par) 50,000 50,000
Additional paid-in-capital 200,000 200,000
Retained earnings 80,000 160,000
Total liabilities and equity $1,000,000 $1,300,000

2015 2016
Net sales $1,300,000 $1,600,000
Cost of goods sold 780,000 960,000
Gross profit 520,000 640,000
Marketing 130,000 160,000
General and administrative 150,000 150,000
Depreciation 40,000 55,000
EBIT 200,000 275,000
Interest 45,000 55,000
Earnings before taxes 155,000 220,000
Income taxes (40% rate) 62,000 88,000
Net income $ 93,000 $ 132,000

Cash dividends $37,000 $52,000

A. Munich has a target dividend payout of 40 percent of net income. Based on the 2016
financial statements relationships, estimate the sustainable sales growth rate for the
Munich Corporation for 2017.

2015 total common (stockholders’) equity = 50,000 + 200,000 + 80,000 = 330,000

Actual 2016 total common equity = 50,000 + 200,000 + 160,000 = 410,000
Note: actual dividend payout ratio was 39.39% (52,000/132,000) with a retention rate of
60.61% (1 – 39.39%) or, 80,000 (132,000 x .6061)

g = (410,000 – 330,000)/330,000 = 80,000/330,000 = .2424 = 24.24%

Revised 2016 total common equity (with 40% target dividend payout):
Net Income times (1 - .40) = 132,000 x .60 = 79,200 in added retained earnings
Beginning equity of 330,000 + 79,200 = 409,200 ending equity

g = (409,200 – 330,000)/330,000 = 79,200/330,000 = .2400 = 24.00%

Expanded model:

g = 132,000/1,600,000 x 1,600,000/1,300,000 x 1,300,000/330,000 x (1 - .40)

= .0825 x 1.2308 x 3.9394 x .6 = .2400 = 24.00%

B. Show how your answer in Part A would change if Munich decided not to pay any
dividends in 2017.

Retention rate = 1.00 or 100%

Retention amount = 132,000 x 1.00 = 132,000
Revised 2010 total common equity = 330,000 + 132,000 = 462,000
10 Chapter 9: Projecting Financial Statements

g = (462,000 – 330,000)/330,000 = 132,000/330,000 = .4000 = 40.00%

Expanded model:

g = 132,000/1,600,000 x 1,600,000/1,300,000 x 1,300,000/330,000 x (1 - 0.00)

= .0825 x 1.2308 x 3.9394 x 1.00 = .4000 = 40.00%

C. Assume the Munich Corporation wants to grow its sales by 40 percent in 2017 over its
2016 level. Estimate the additional funds needed that will be necessary to support this
rapid increase in sales.

Forecasted Sales = 1,600,000 x 1.40 = 2,240,000

Change in Sales = 2,240- 1,600,000 = 640,000
Assume target dividend payout of 40%

AFN = (1,300,000/1,600,000 x 640,000) – ((180,000 + 70,000)/1,600,000 x 640,000) –

(2,240,000 x 132,000/1,600,000) x (1 – .40)
= (.8125 x 640,000) – (.15625 x 640,000) – (2,240,000 x .0825) x .60
= 520,000 – 100,000 – (184,800 x .60) = 520,000 - 100,000 – 110,880
= 309,120

D. Sales are forecasted to increase an additional 20 percent in 2018 over 2017. Estimate
the two-year AFN that the Munich Corporation will need to finance its 2017 and 2018
sales growth plans.

Estimated 2018 sales = 1,600,000 x 1.40 x 1.20 = 2,688,000

Or,
Estimated 2017 sales = 1,600,000 x 1.40 = 2,240,000
Estimated 2018 sales = 2,240,000 x 1.20 = 2,688,000
Change in 2017 sales = 2,240,000 – 1,600,000 = 640,000
Change in 2018 sales = 2,688,000 – 2,240,000 = 448,000
Total Two-Year sales = 2,240,000 + 2,688,000 = 4,928,000
Change in Two-Year Sales = 2,688,000 – 1,600,000 = 1,088,000
[or, 640,000 + 448,000 = 1,088,000]
Assume target dividend payout of 40%

AFN = (1,300,000/1,600,000 x 1,088,000) – ((180,000 + 70,000)/1,600,000 x 1,088,000)

– (4,928,000 x 132,000/1,600,000) x (1 – .40)
= (.8125 x 1,088,000) – (.15625 x 1,088,000) – (4,928,000 x .0825) x .60
= 884,000 – 170,000 – (221,760 x .60) = 884,000 - 170,000 – 243,936 =
= 470,064

Alternatively, the AFN could be calculated separately for each of the two years.

AFN 2017 = 309,120 (see Part C)

Change in sales for 2018 over 2017 = 2,688,000 – 2,240,000 = 448,000

AFN 2018 = (.8125 x 448,000) – (.15625 x 448,000) – (2,688,000 x .0825 x .6)

 Chapter 9: Projecting Financial Statements 11

= 364,000 – 70,000 – 133,056 = 160,944

AFN Combined for 2017 & 2018 = 309,120 + 160,944 = 470,064

6. [Multi-Year Financial Statement Projections] The Minoso Corporation anticipates a 20

percent increase in sales for 2017, 2018, and 2019. Minoso is currently operating at full
capacity and thus expects to increase its investment in both current and fixed assets in order
to support the increase in forecasted sales. The Minoso Corporation’s 2016 income and
balance sheet statements are given in problem 4.

A. Prepare an Excel spreadsheet model that projects the income statement, balance sheet, and
statement of cash flows for 2017 prior to obtaining any additional financing. Use a separate
AFN long-term financing (liability/equity) account to show the amount of financing needed
to make the balance sheet balance.

Financial statement projections for 2017 (as well as 2018 and 2019) are presented under Part
B below. The AFN for 2017 is 1120 prior to obtaining any additional debt and/or equity
financing.

B. Extend your 2017 spreadsheet-based financial statement projections for two additional years
(2018 and 2019). What is the total amount of AFN needed over the three-year period?

The total (cumulative) amount of AFN needed over the 2017-19 three-year period is 3984.6
(almost 4000, or nearly $4 million since the data are presented in thousands of dollars) prior
to making any financing decisions.
12 Chapter 9: Projecting Financial Statements
 Chapter 9: Projecting Financial Statements 13

C. Show how your spreadsheet model projections will change if the AFN from Part B is
financed by issuing additional long-term debt at a 10% interest rate.

The AFN for 2017 increases from 1120 prior to obtaining any additional debt and/or equity
financing to 1160.3 after financing the initial 1120 with long-term debt at a 10 percent
interest rate. For the initial calculation, 1120 x .10 = 112 which is added to the existing 400
of interest for 512. However, more than 1120 would have to be borrowed to pay the
additional 112 in interest. While this first pass interest estimate captures most of the total
additional interest amount (and avoids circularity problems with simultaneously estimating
financing needs and interest costs), several additional iterations or the Excel goal seek
function could be used to find a final slightly higher interest amount.

The total (cumulative) amount of AFN needed over the 2017-19 three-year period assuming
the AFN is financed with long-term debt (LTD) at a 10 percent interest rate is estimated to be
4256.1 or an additional 271.5 (4256.1 - 3984.6) to cover financing the AFN with LTD at a 10
percent interest rate.
14 Chapter 9: Projecting Financial Statements
Chapter 9: Projecting Financial Statements 15