In a daring act of industrial espionage, Road Runner has managed to purloin the financial statements for Year 1 for Acme Corp and pass it to her friend Bugs Bunny. Bugs plans to profit from it by selling it on the DarkNet. However, he soon realises that there is not much of a market for historical information and only information about future performance is valued. Bugs reckons that if he could put together a pro-forma financial statement for the following year (Year 2), there might be more takers for his information. Unfortunately, plot constraints prevent him from getting this information directly from Road Runner and require him to decipher the messages she passes along in Morse coded Beeps. Hours of ardous decoding have left him with the following pieces of information (listed below) regarding for Year 2 performance of Acme. Use this information to help Bugs Bunny put together a pro-forma income statement and balance sheet for Acme Corp. for Year 2. Next prepare a sources and uses of funds table to show how funds are expected to be utilized.

(Hint 1: Start from the income statement, then move to the liabilities and equity section of the balance sheet before finally moving to the asset section.

Hint 2: If your calculations are correct, total uses of funds should equal total sources of funds.)

1. Asset turnover (based on starting total assets for Year 2) is expected to be 0.65.
2. Gross profit percentage would continue to be 50%.
3. Accounts Receivable days (based on sales for Year 2) is expected to be 45 (360 day-count convention).
4. Inventory days (based on COGS for Year 2) is expected to be 50 (360 day-count convention).
5. Accounts Payable days (based on COGS for Year 2) is expected to be 60 (360 day-count convention).
6. Unearned Revenue is expected to be at 5.0% of sales.
7. 25% of Employee Expenses and Other Expenses would be incurred in advance.
8. $200 million would be invested in PP&E.
9. Depreciation is expected to be 15% of the ending net PP&E for Year 1.
10. No amortization of Goodwill is expected in Year 2.
11. Employee Expenses and Other Expenses would grow 20% y-o-y in Year 2 (compared to Year 1).
12. Interest Expense of 10% on the opening Total Debt balance for Year 2 is expected.
13. Taxes are estimated to be 40% of the profit before tax. However, Amortization of Goodwill is not tax deductible. Assume Taxes are paid out in Year 2 itself.
14. Acme is expected to continue its 50% Dividend policy. Assume Dividends are paid out in Year 2 itself.
15. No Equity issuance is expected in Year 2.
16. Acme Corp. is expected to repay $50 million of its Term Loans and issue $100 million of new Bonds.

Note that in the balance sheet and the income statement all items are entered as positive numbers (e.g. accumulated depreciation, cost of goods sold, various expense items, taxes etc.). Please make sure you follow this convention while filling in your answers. The units for all the answers are $ millions, so enter your answer accordingly - i.e., if your cash balance is $100.5 million, then enter 100.5 in the cell. Do not round intermediate calculations. Round your answer to 2 decimal places.

Assets	Year 0	Year 1	Year 2		Liabilities & Equity	Year 0	Year 1	Year 2
Cash	20	100			Accounts Payable	60	60
Accounts Receivable	50	80			Unearned Revenue	20	20
Inventory	40	55			Total Current Liabilities	80	80
Prepaid Expenses	20	15
Total Current Assets	130	250			Term Loans	50	100
					Bonds	400	350
Gross PP&E	1000	1200			Total Debt	450	450
Accumulated Depreciation	300	400
Net PP&E	700	800			Equity Capital	400	550
					Reserves and Surplus	200	220
Goodwill	300	250			Total Equity	600	220
Total Assets	1130	1300			Total Liabilities and Equity	1130	1300

	Year 1	Year 2
Net Sales	700
Cost of Goods Sold	350
Gross Profit	350
Employee Expenses	30
Other Expenses	30
Depreciation	100
Amortization of Goodwill	50
Operating Income	140
Interest Expense	40
Taxes	60
Net Income	40
of which paid out as dividends	20

Include Cash in the definition of working capital while calculating investment in net working capital. Investment in net working capital could be negative when net working capital reduces from Year 1 to Year 2

Sources of Funds	Year 1	Year 2
Net Income	40
Depreciation & Amortization	150
Net Debt Issuance	0
Net Equity Issuance	150	0
Total Sources of Funds	340
Uses of Funds	Year 1	Year 2
Capital Expenditure	200
Investment in Net Working Capital	120
Dividend Payment	20
Total Uses of Funds	340