Part B: Scenario Analysis 1. Contraction. Assume increased competition and a depressed economy limits sales growth to 7% in 2015. In addition, rising interest rates push the rate on short-term debt to 9.5%. Also, rising costs lower gross margins, pushing COGS/Sales to 68.5%.

Q3: Under the contraction scenario, what level of long-term debt will be required in 2015? _________________

Q4: What is projected net income? _________________

2. High growth. Unexpected demand pushes sales growth to 30% in 2015. Because some costs are fixed, SG&A/Sales drops to 7.5%. Also, much of the sales growth is supported by existing excess capacity, so PPE/Sales is projected to be only 425%. COGS/Sales returns to its initial level (average of previous 3 years). The interest rate on short-term debt returns to its initial level.

Q5: Under the high-growth scenario, what level of long-term debt will be required in 2015? _________________

Q6: What is projected net income? _________________

B D E F G H 2011 2012 2013 2014 2015 Assumed Actual Actual Actual Actual Pro forma % of Sales 438.7% 222.199 66.142 $156.056 284.026 69.410 $214.616 337.593 73.708 $263.885 410.898 79.814 $331.083 514.083 86.501 $427.582 $190.615 $256.634 $311.889 $392.844 $503.072 A 1 New England Corporation 2 Pro forma financial statements 34 35 Gross PPE 36 Accumulated depreciation 37 Net PPE 38 39 Total assets 40 41 LIABILITIES AND EQUITY 42 Current liabilities 43 Accounts payable 44 Short-term debt 45 Total current liabilities 46 47 Long-term debt (PLUG) 48 Total liabilities 49 50 Shareholders' equity 51 Paid-in capital 52 Retained earnings 53 Total shareholders' equity 54 55 Total liabilities and shareholders' equity 56 $21.326 20.676 $42.002 $48.500 28.830 $77.330 $56.173 40.450 $96.622 $63.250 53.258 $116.508 $84.210 60.000 $144.210 71.9% 51.2% 26.800 $68.802 27.206 $104.536 40.747 $137.369 59.494 $176.002 137.155 $281.365 60.300 61.513 $121.813 87.100 64.998 $152.098 107.200 67.319 $174.519 147.400 69.442 $216.842 147.400 74.307 $221.707 $190.615 $256.634 $311.889 $392.844 $503.072 B D E F G H 2011 2012 2013 2014 2015 Assumed Actual Actual Actual Actual Pro forma % of Sales 438.7% 222.199 66.142 $156.056 284.026 69.410 $214.616 337.593 73.708 $263.885 410.898 79.814 $331.083 514.083 86.501 $427.582 $190.615 $256.634 $311.889 $392.844 $503.072 A 1 New England Corporation 2 Pro forma financial statements 34 35 Gross PPE 36 Accumulated depreciation 37 Net PPE 38 39 Total assets 40 41 LIABILITIES AND EQUITY 42 Current liabilities 43 Accounts payable 44 Short-term debt 45 Total current liabilities 46 47 Long-term debt (PLUG) 48 Total liabilities 49 50 Shareholders' equity 51 Paid-in capital 52 Retained earnings 53 Total shareholders' equity 54 55 Total liabilities and shareholders' equity 56 $21.326 20.676 $42.002 $48.500 28.830 $77.330 $56.173 40.450 $96.622 $63.250 53.258 $116.508 $84.210 60.000 $144.210 71.9% 51.2% 26.800 $68.802 27.206 $104.536 40.747 $137.369 59.494 $176.002 137.155 $281.365 60.300 61.513 $121.813 87.100 64.998 $152.098 107.200 67.319 $174.519 147.400 69.442 $216.842 147.400 74.307 $221.707 $190.615 $256.634 $311.889 $392.844 $503.072