Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed assets. The company forecasts that the ratio of revenues to total assets at the start of each year will remain at 1.75. Fixed costs are expected to remain at $53, and variable costs at 80% of revenue. The company's policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20%.
a. Construct a model for Executive Cheese like the one in Tables 29.9 to 29.11.
b. Use your model to produce a set of financial statements for 2017.

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Income Statement Revenue Fixed costs Variable costs (80% of revenue) Depreciation Interest (at 1 1.8%) Taxes (at 40%) Net income $1,785 53 1,428 80 24 80 $ 120 Balance Sheet, Year-End 2016 2015 Assets: 400 340 Net working capital Fixed assets Total assets 1,200 $1,020 Liabilities: 240 204 960 816 1,200 $1,020 Debt Book equity Total liabilities Sources and Uses Net income Depreciation Borrowing Stock issues $120 80 36 Total sourc es $340 Uses: S 60 200 80 $340 Increase in net working capital Dividends Total uses