Calculate the according to formulas

tax rate is 30%, borrowing rate 5 %

Net Cumulative source (need) Int. cost-new debt Net source (need) Debt (excess) Equity Debt/equity Unused debt capacity Excess cash - dividends Beginning period cumulative source (need) + Net Cumulative source (need) x Borrowing rate x (1 - Tax rate) Cumulative source (need) + Int. cost-new debt Beginning debt - Net source (need) OR Debt (excess) - Net - Int. cost-new debt Beginning equity - Dividends + Net income + Int. cost-new debt Debt (excess) / Equity Debt/equity maximum x Equity - Debt (excess) -10- UVA-F-1489 Exhibit 2 2 GAINESBORO MACHINE TOOLS CORPORATION Consolidated Balance Sheets (dollars in thousands) Cash & equivalents Accounts receivable Inventories Prepaid expenses Other Total current assets Property, plant, & equipment Less depreciation Net property, plant, & equipment Intangible assets Other assets Total assets Bank loans Accounts payable Current portion of long-term debt Accruals and other Total current liabilities For the Years Ended December 31 2003 2004 $13,917 $22.230 208,541 187.235 230,342 203.888 14,259 13,016 22.184 20,714 489.242 447,082 327,603 358,841 167,414 183.486 160,190 175.355 9,429 2,099 15,723 17.688 S674,583 S642.223 Projected 2005 $25.665 217,510 217,221 15,011 21,000 496 407 410,988 205.530 205,458 1,515 17,969 $721,350 UVA-F1489 Exhibit GAINESBORO MACHINE TOOLS CORPORATION Projected Sources-and-Uses Statement Assuming a 40% Payout Ratio (dollars in millions) $34.196 36,449 300 129,374 200,318 571,345 34.239 150 161,633 267,367 $74,981 37.527 1,515 183,014 297,037 Ta 13.769 8.775 64.329 5.444 359,683 SS SS S 1819 $ 1.01 201275 16,986 9,000 44,790 2,318 273,411 18,855 107,874 Deferred taxes Long-term debt Deferred pension costs Other liabilities Total liabilities Common stock, Si par value Capital in excess of par Cumulative translation adjustment Retained camnings Less treasury stock at cost: 1990- 256,151: 1991-255,506 Total shareholders' equity Total liabilities & equity 16,526 30,021 70,134 7.505 421,224 18,835 107.889 26,990 156,875 ES 5 18.855 107.907 20,208 146,065 11 0943 291,498 3 5 183 TIS (10,490) 401.172 S674,583 (10,494) 282.541 S642,223 (10,464) 300,126 5721,350 Note Dividend calculated as of net income This analysis ignore the effects of bomowing on interest and mortization. It includes all increases in long-term liabilities and equity items other than stained Note: Projections assume a dividend payout ratio of 40% Net Cumulative source (need) Int. cost-new debt Net source (need) Debt (excess) Equity Debt/equity Unused debt capacity Excess cash - dividends Beginning period cumulative source (need) + Net Cumulative source (need) x Borrowing rate x (1 - Tax rate) Cumulative source (need) + Int. cost-new debt Beginning debt - Net source (need) OR Debt (excess) - Net - Int. cost-new debt Beginning equity - Dividends + Net income + Int. cost-new debt Debt (excess) / Equity Debt/equity maximum x Equity - Debt (excess) -10- UVA-F-1489 Exhibit 2 2 GAINESBORO MACHINE TOOLS CORPORATION Consolidated Balance Sheets (dollars in thousands) Cash & equivalents Accounts receivable Inventories Prepaid expenses Other Total current assets Property, plant, & equipment Less depreciation Net property, plant, & equipment Intangible assets Other assets Total assets Bank loans Accounts payable Current portion of long-term debt Accruals and other Total current liabilities For the Years Ended December 31 2003 2004 $13,917 $22.230 208,541 187.235 230,342 203.888 14,259 13,016 22.184 20,714 489.242 447,082 327,603 358,841 167,414 183.486 160,190 175.355 9,429 2,099 15,723 17.688 S674,583 S642.223 Projected 2005 $25.665 217,510 217,221 15,011 21,000 496 407 410,988 205.530 205,458 1,515 17,969 $721,350 UVA-F1489 Exhibit GAINESBORO MACHINE TOOLS CORPORATION Projected Sources-and-Uses Statement Assuming a 40% Payout Ratio (dollars in millions) $34.196 36,449 300 129,374 200,318 571,345 34.239 150 161,633 267,367 $74,981 37.527 1,515 183,014 297,037 Ta 13.769 8.775 64.329 5.444 359,683 SS SS S 1819 $ 1.01 201275 16,986 9,000 44,790 2,318 273,411 18,855 107,874 Deferred taxes Long-term debt Deferred pension costs Other liabilities Total liabilities Common stock, Si par value Capital in excess of par Cumulative translation adjustment Retained camnings Less treasury stock at cost: 1990- 256,151: 1991-255,506 Total shareholders' equity Total liabilities & equity 16,526 30,021 70,134 7.505 421,224 18,835 107.889 26,990 156,875 ES 5 18.855 107.907 20,208 146,065 11 0943 291,498 3 5 183 TIS (10,490) 401.172 S674,583 (10,494) 282.541 S642,223 (10,464) 300,126 5721,350 Note Dividend calculated as of net income This analysis ignore the effects of bomowing on interest and mortization. It includes all increases in long-term liabilities and equity items other than stained Note: Projections assume a dividend payout ratio of 40%