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The following information is available: (a) The construction period will last for one year, beginning on 1" April of year n and ending on 31" March of year n+1. (b) The first operating period will begin on 1" April of year mel and end on 31" March of year n-2. This will be immediately followed by the second operating year which will end on 31" March of year n+3. (c) The term losh will carry an interest rate of 10 percent. Each amount disbursed is repayable in 16 equal semi-annual instalments, the first such repayment commencing from the end of the I operating year. The interest on term loan during the construction period is included in pre-operative expenses, Interest due in each subsequent half year is payable at the end of the same half year. The term loan disbursals in each operating year will at beginning. (d) Short-term bank borrowings in the two operating years will occur right in the beginning of those years and carry an interest rate of 8 percent which is payable at the end of the respective operating year. (e) Pre operative expenses will be allocated to land, building, plant and machinery, and miscellaneous fixed assets in proportion of their values. Preliminary expenses will be written off in ten equal annual instalments. (f) For the first two operating years the expected revenues are 42000 and 60000 and the expected cost of sales (excluding depreciation, other amortisation, and interest) are 280000 and 40900 respectively. There is no tax liability in these years. () The depreciation rates for company law purposes will be as follows: buildings (3.34%); other assets (10.34%). The method of depreciation will be the straight line method. Required Prepare the following: (a) Projected income statements for the first two onerating years. (b) Projected cash flow statements for the construction perledMINICASE Magna Industries Lid. Is being set up to manufacture industrial gears, The expected outlays and proposed financing during the construction and the first two operating years are shown below. Outby's Construction Pred Operating Your Land 120 Building 6110 Plant & machinery Miscellaneous fiord asack 1720 Preliminary expenal Pre-operative ripemes IIIIII Current assets [Other than cash 421 10 2500 Firunring Equity capital Term loan Short-term bank borrowing 17 100