A firm has the following balance sheet and income statement (in millions of dollars):

The long-term debt is 8 percent coupon debt maturing in five years. The statutory tax rate is 38 percent. Prepare pro forma financial statements for the next five years under the two following scenarios. Also forecast cash available for debt service and the debt service requirement under both scenarios. The firm pays no dividends.
a. Sales are expected to grow at 4 percent per year, with the current operating profit margin being maintained and with an asset turnover of 1.14.
b. Sales are expected to decline by 4 percent per year and operating profit margins are expected to decline to 2 percent. With some assets inflexible, asset turnovers are expected to decline to 0.08.
Does either of these two scenarios forecast default on thedebt?

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Balance Sheet Operating cash Recelvables Inventories Plant and equipment 29 138 642 1,113 288 Operating liabäties Long-term debt (8%) 983 130 $1.113 Stockhclders eqity Income Statement Reventes Operating expenses Operating income Interest expense Incone before tax ncome taxes Income after tax 3908 817 91 5S 36 s 23