Broadway Company is deciding whether to acquire Landmark Company. Use the following information to create the proforma financial statements (Income Statement, Balance Sheet and Statement of Cash Flows) for years 2015- 2020 under the assumption that 100% debt financing is used.

- Broadway's revenue would decline by 10% in years 2015 & 2016; then grow at 9% for the years 2017, 2018 & 2019 & 4.5% thereafter.

- Operating expenses as a percentage of sales would remain constant at 2%, starting in 2015.

- Depreciation would grow by $200,000 a year. The corporate tax rate is 35%.

- Under 100% debt financing: A $120 million, all debt financing would be arranged through a syndicated loan package. This loan would carry a 5.5% annual interest and mature at the end of 2023. The loan would be amortized at a rate of $5 million a year for six years starting in 2017, and the final payment of $90million would be made at loan maturity.

Exhibit 2 Broadway Industries: Simplified Financial Statements, 2010-2014 millions) 2010 2011 2012 2013 2014 TE Income statement Net sales 137.8 126.1 11.7 161.9 148.6 13.3 143.5 149.5 131.5 137.1 12.4 2.9 2.5 7.0 155.3 142.5 12.8 Gross profit Operating expenses 12.0 2.9 2.2 reciation and amortization Operating profit Interest expense Income taxes Net income EPS Dividends Balance sheet Cash Accounts receivable Other current assets Current assets Net PP&E Investments and other assets Total assets Accounts payable Long-term Current Liabilities Long-term debt Accrued Other non-current liabilities Total liabilities Shareholders' Total liabilities and 7.0 7.4 2.3 2.3 4.3 2.3 2.5 1.23 $1.2 $1.22 $1.23 S0.24$0.24$0.24 $1.30 $0.24 $0.24 13.1 13.5 14.6 15.2 16.2 17.7 16.0 18.5 174 38.6 74.5 20.6 18.6 41.8 22.5 20.9 43.5 86.8 11.5 20.9 43.2 83.8 69.6 current portionb 10.3 10.8 8.3 13.3 12.8 11.2 42.0 32.5 74.5 13.0 10.9 43.7 expenses and deferred taxes 11.6 11.0 40.5 29.1 69.6 12.5 44.4 39.4 83.8 36.0 86.8 a Interest rate on long-term debt outstanding is at 4.5% per year Principal amount of long-term debt is amortized at $0.4m per year Exhibit 2 Broadway Industries: Simplified Financial Statements, 2010-2014 millions) 2010 2011 2012 2013 2014 TE Income statement Net sales 137.8 126.1 11.7 161.9 148.6 13.3 143.5 149.5 131.5 137.1 12.4 2.9 2.5 7.0 155.3 142.5 12.8 Gross profit Operating expenses 12.0 2.9 2.2 reciation and amortization Operating profit Interest expense Income taxes Net income EPS Dividends Balance sheet Cash Accounts receivable Other current assets Current assets Net PP&E Investments and other assets Total assets Accounts payable Long-term Current Liabilities Long-term debt Accrued Other non-current liabilities Total liabilities Shareholders' Total liabilities and 7.0 7.4 2.3 2.3 4.3 2.3 2.5 1.23 $1.2 $1.22 $1.23 S0.24$0.24$0.24 $1.30 $0.24 $0.24 13.1 13.5 14.6 15.2 16.2 17.7 16.0 18.5 174 38.6 74.5 20.6 18.6 41.8 22.5 20.9 43.5 86.8 11.5 20.9 43.2 83.8 69.6 current portionb 10.3 10.8 8.3 13.3 12.8 11.2 42.0 32.5 74.5 13.0 10.9 43.7 expenses and deferred taxes 11.6 11.0 40.5 29.1 69.6 12.5 44.4 39.4 83.8 36.0 86.8 a Interest rate on long-term debt outstanding is at 4.5% per year Principal amount of long-term debt is amortized at $0.4m per year