The manager Mr. Cota hired for 2005 prepared some forecasts for 2005, using the actual 2004 financial statements as a starting point. As an exercise, finish his pro forma statements for 2005 by calculating interest expenses and revolving credit for 2005, and making sure the balance sheet balances. Assume an 8 percent interest rate on revolving credit and long-term debt accounts. Remember to iterate until your interest expense is consistent with the outstanding amount of debt and the external funding need is zero. Report back with your findings.

1 Pro Forma Statements 2 Table 1 3 (thousands of \$) 4 Selected income statement items, year ended December 31, 7 Cost of goods sold, excl. depreciation 8 Depreciation 9 Gross profit 10 SG\&A 11 Operating profit 12 Interest expense 13 Profit before tax 14 Income taxes 15 Net income \begin{tabular}{|c|c|} \hline 2005 & 2004 \\ \hline 856.5 & 808.0 \\ \hline 616.7 & 607.2 \\ \hline 37.7 & 23.0 \\ \hline 202.1 & 177.8 \\ \hline 137.0 & 133.3 \\ \hline 65.1 & 44.5 \\ \hline 65.1 & 6.8 \\ \hline 23.4 & 37.7 \\ \hline 41.6 & 13.6 \\ \hline \end{tabular} Selected Balance Sheet items at December 31, 18 19 Cash 20 Accounts receivable 21 Inventories 22 Total current assets 23 Net fixed assets 24 Total assets \begin{tabular}{|c|c|} \hline 2005 & 2004 \\ \hline 4.7 & 4.9 \\ \hline 72.7 & 61.0 \\ \hline 15.2 & 12.5 \\ \hline 92.6 & 78.4 \\ \hline 361.8 & 304.6 \\ \hline 454.4 & 383.0 \\ \hline \end{tabular} 26 Current portion, LTD 27 Accounts payable 28 Other accrued expenses 29 Revolving credit, bank 30 Total current liabilities 31 Long-term (mortgage) debt 32 External funding needs 33 Net worth 34 Liabilities \& net worth \begin{tabular}{|c|c|} \hline 3.0 & 3.0 \\ \hline 33.8 & 14.6 \\ \hline 5.1 & 5.5 \\ \hline 41.9 & 51.8 \\ \hline 39.0 & 74.9 \\ \hline \multicolumn{1}{|c|}{42.0} \\ \hline 307.8 & 266.1 \\ \hline 388.7 & 383.0 \\ \hline \end{tabular} 1 Pro Forma Statements 2 Table 1 3 (thousands of \$) 4 Selected income statement items, year ended December 31, 7 Cost of goods sold, excl. depreciation 8 Depreciation 9 Gross profit 10 SG\&A 11 Operating profit 12 Interest expense 13 Profit before tax 14 Income taxes 15 Net income \begin{tabular}{|c|c|} \hline 2005 & 2004 \\ \hline 856.5 & 808.0 \\ \hline 616.7 & 607.2 \\ \hline 37.7 & 23.0 \\ \hline 202.1 & 177.8 \\ \hline 137.0 & 133.3 \\ \hline 65.1 & 44.5 \\ \hline 65.1 & 6.8 \\ \hline 23.4 & 37.7 \\ \hline 41.6 & 13.6 \\ \hline \end{tabular} Selected Balance Sheet items at December 31, 18 19 Cash 20 Accounts receivable 21 Inventories 22 Total current assets 23 Net fixed assets 24 Total assets \begin{tabular}{|c|c|} \hline 2005 & 2004 \\ \hline 4.7 & 4.9 \\ \hline 72.7 & 61.0 \\ \hline 15.2 & 12.5 \\ \hline 92.6 & 78.4 \\ \hline 361.8 & 304.6 \\ \hline 454.4 & 383.0 \\ \hline \end{tabular} 26 Current portion, LTD 27 Accounts payable 28 Other accrued expenses 29 Revolving credit, bank 30 Total current liabilities 31 Long-term (mortgage) debt 32 External funding needs 33 Net worth 34 Liabilities \& net worth \begin{tabular}{|c|c|} \hline 3.0 & 3.0 \\ \hline 33.8 & 14.6 \\ \hline 5.1 & 5.5 \\ \hline 41.9 & 51.8 \\ \hline 39.0 & 74.9 \\ \hline \multicolumn{1}{|c|}{42.0} \\ \hline 307.8 & 266.1 \\ \hline 388.7 & 383.0 \\ \hline \end{tabular}