Veneer Corporation has a competitive advantage in contract manufacturing of small electrical components and expects their competitive advantage to last two years through calendar 2021. The competitive advantage will allow it to increase sales by 20% annually for 2020 and 2021, and, after that, its sales will grow at the same rate as the increase in nominal GDP.

Prepare a proforma income statement, balance sheet, and firm free cash flow for Veneer for 2020 and 2021 (the planning period) using the following assumptions:

1. Sales are expected to grow by 20% annually.
2. Cost of goods sold and operating expenses are a constant percent of revenues, interest is 5% of Beginning of Year (BOY) long-term debt plus short-term debt, depreciation is 10% of BOY total fixed assets (gross, not net) and income taxes are 35% of income before tax.
3. The projected cash balances will change to balance the balance sheet, and the remaining current assets increase in proportion to sales.
4. Gross fixed assets increase 5% each year.
5. Accounts payable increases in proportion to sales.
6. Short-term debt remains the same each year of the planning period. Long-term debt is payable, beginning at the end of the year 2020 and continuing at the end of each year, in equal annual principal payments of $540.
7. Retained earnings increases by net income and decreases by dividends. The dividend payout ratio is 25%.
8. During 2021, capital stock with a par value of $1 per share will be sold for $1 per share or a total of $500. There are no other sales of capital stock.

Veneer's Balance Sheet and Income Statement for 2018 and 2019 is shown below:

Veneer Corporation
Balance Sheets
December 31, 2018 and 2019
						Historical
	ASSETS					2018	2019
	Current Assets:
	Cash					368	1,823
	Accounts receivable					1,622	1,599
	Inventories					544	590
	Total Current Assets					2,534	4,012
	Fixed Assets
	Total Fixed Assets (Gross)					7,800	8,474
	Accumulated depreciation					(580)	(730)
	Net Fixed Assets					7,220	7,744
	TOTAL					9,754	11,756
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current Liabilities:
	Accounts payable					370	512
	5% Short-term debt					1,800	2,288
	Total Current Liabilities					2,170	2,800
	5% Long-term debt					5,070	5,392
	Shareholders' Equity:
	Common stock					1,000	1,000
	Additional paid-in capital					2,000	2,000
	Retained earnings					(250)	797
	Total					2,750	3,797
	Treasury stock					(233)	(233)
	Total Shareholders' Equity					2,517	3,564
	TOTAL					9,757	11,756
			Statements of Income
						Historical
						2018	2019
	Revenues					16,389	18,210
	Cost of goods sold					10,832	12,035
	Gross profit on sales					5,558	6,175
	Operating expenses					3,521	3,912
	Depreciation					150	150
	EBIT					1,887	2,113
	Interest expense					603	502
	Income Taxes					449	564
	Net Income					834	1,047