Lucas Industries has provided you with the following projections. Create pro forma income statements and balance sheets for each of the next five years (2019-2023). Be sure to identify the external financing required for each year. 2019 2020 2021 2022 2023 Sales growth rate (%) 7 7 6 6 5 Gross margin (%) 30 30 29 29 29 Increase in SG&A (%) 7 7 6 6 5 Increase in Dep. Expense ($)* 5 5.5 6.5 7.5 7.5 Cap. Exp. ($) * 50 55 65 75 75 Inventory Turns 7.5 7.7 7.9 8.2 8.2 DSO 22 22 21 21 20 DPO 16 16 18 18 18 Other cur. assets (% to sales) 0.6 0.6 0.6 0.6 0.6 Accruals (% of sales) 2.5 2.5 3 3 3 Cash (% of sales) 3 3 2 2 2 Dividends (% of net income) 10 10 10 15 15 *Values are in millions. Note: The existing long-term loan will continue to be paid down by $20 million each year. Notes payable will remain constant over the forecast period. Interest of 10 percent will be paid on the ending balance of the loans for the previous year (i.e., 2019 interest expense will be based on ending 2018 debt outstanding). Net sales for 2018 is 1456.5

Lucas Industries Balance Sheets In millions 2016 2017 2018 $ $ 47.0 110.8 149.5 9.3 Assets Cash Accounts receivable Inventory Other current assets Current assets Gross fixed assets Accumulated depreciation Net fixed assets Total assets 47.6 97.3 134.7 8.1 287.7 194.3 (59.6) 134.7 422.4 56.6 88.5 138.5 8.6 292.2 232.1 (91.5) 140.6 432.8 316.6 266.1 (125.5 140.6 457.2 $ $ $ $ Liabilities & Equity Accounts payable Accruals Notes payable Current liabilities Long-term debt Common stock Retained earnings Total liabilities & equity 39.8 28.3 20.0 88.1 120.0 110.0 104.2 422.3 39.5 33.3 20.0 92.8 100.0 110.0 130.0 432.8 48.3 34.0 20.0 102.3 80.0 110.0 164.9 457.2 $ $ Lucas Industries Income Statements In millions 2016 2017 2018 $ $ $ Net Sales Cost of Goods Sold Gross profit SG&A Depreciation EBIT Interest Expense Earnings before taxes Taxes (40%) Net income 1,347.0 956.4 390.6 323.3 29.6 37.7 14.0 23.7 1,448.0 1,010.7 437.3 350.4 31.9 55.0 12.0 43.0 1,546.5 1.076.4 470.1 368.1 34.0 68.0 10.0 58.0 23.2 9. 51 17.2 14.2 $ 25.8 $ 34.8 Lucas Industries Balance Sheets In millions 2016 2017 2018 $ $ 47.0 110.8 149.5 9.3 Assets Cash Accounts receivable Inventory Other current assets Current assets Gross fixed assets Accumulated depreciation Net fixed assets Total assets 47.6 97.3 134.7 8.1 287.7 194.3 (59.6) 134.7 422.4 56.6 88.5 138.5 8.6 292.2 232.1 (91.5) 140.6 432.8 316.6 266.1 (125.5 140.6 457.2 $ $ $ $ Liabilities & Equity Accounts payable Accruals Notes payable Current liabilities Long-term debt Common stock Retained earnings Total liabilities & equity 39.8 28.3 20.0 88.1 120.0 110.0 104.2 422.3 39.5 33.3 20.0 92.8 100.0 110.0 130.0 432.8 48.3 34.0 20.0 102.3 80.0 110.0 164.9 457.2 $ $ Lucas Industries Income Statements In millions 2016 2017 2018 $ $ $ Net Sales Cost of Goods Sold Gross profit SG&A Depreciation EBIT Interest Expense Earnings before taxes Taxes (40%) Net income 1,347.0 956.4 390.6 323.3 29.6 37.7 14.0 23.7 1,448.0 1,010.7 437.3 350.4 31.9 55.0 12.0 43.0 1,546.5 1.076.4 470.1 368.1 34.0 68.0 10.0 58.0 23.2 9. 51 17.2 14.2 $ 25.8 $ 34.8