The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase and fixed assets (that is, assets net of depreciation) by $200,000 per year for the next 5 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 10% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $56,000 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 25% of total capital.

INCOME STATEMENT, 2015
(Figures in $ thousands)
Assets
Net working capital ................................. $ 400
Fixed assets ............................................. 800
Total assets .......................................... $1,200
Liabilities and shareholders' equity
Debt ..................................................... $ 300
Equity ..................................................... 900
Total liabilities and shareholders' equity ......... $1,200
a. Produce a set of financial statements for 2016. Assume that net working capital will equal 50% of fixed assets.
b. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2016. What is the projected debt ratio for 2016?

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INCOME STATEMENT, 2015 (Figures in $ thousands) Revenue Fixed costs Variable costs (80% of revenue) Depreciation Interest (8% of beginning-of-year debt) Taxable income Taxes (at 40%) $1,800 56 1,440 80 24 200 80 $ 120 Net income Dividends Addition to retained earnings $80 $40