1. Why can't a profitable company like Hampton repay its loan on time and why does it need more bank financing? What major developments between November 1978 and August 1979 have contributed to this situation? You should prepare a source and use statement and conduct a ratio analysis to evaluate the firm's performance during this period. 2. Based on the information in the case, prepare a projected income statement for the four months from Sept. 1979 through Dec. 1979 and a pro forma balance sheet as of December 31, 1979. (Your income statement should not be monthly. You should make one covering the entire four months.) 3. Critically evaluate the assumptions on which your forecasts are based. You should be very specific what developments could alter your results. Is Mr. Cowins correct in his belief that Hampton can repay the loan in December? 4. Based on the information in the case, prepare a projected month by month cash budget for the four months, September through December 1979. Do the cash budgets and pro forma financial statements yield the same results? Why, why not? Another hint: Do not rely on the statement on page 6, "...our engineering estimates indicate that we expect to earn a profit before taxes and interest of about 23% on sales on these shipments". Instead using the accounting relation in Q#2 (footnote below) when constructing your income statement. 5. What action should Mr. Eckwood take on Mr. Cowins' loan request? What are the major risks associated with the proposed loan? What other alternatives does Mr. Eckwood have and what are the pros and cons? As Mr. Eckwood, what would you do?