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Through three quarters of $1999,$ Compton's financial performance had been strong. Orders were up $16$ percent with net revenue up $25$ percent. The fourth quarter, not yet complete, was one of great interest to Brantly. The United States and world economies were having a modest growth year, but predictions of economic slowdown were starting to surface. Many companies began to rethink their outlook for $2000.$

Compton's budget for capital expenditures in $2000$ had recently been revised and was now predicated on an immediate slowdown in demand for computers and computer systems both domestically and worldwide. In addition, several contingency cost$-$reduction plans had been readied for implementation if and when revenues started declining. Overall, Brantly believed that the company was positioned to withstand a recessionary year.

Preparation for the December Meeting

The $2000$ budgetary process at Compton Computing Systems, which began in May $1999,$ was now complete except for the final approval of the board of directors. What concerned Brantly most was that, through November, indications pointed to a near$-$record quarter for orders. In fact, Compton's backlog of orders was increasing. National and international economic indicators also showed a strong business environment. The predicted downturn was not occurring yet. A retrenchment at the wrong time in the business cycle would be very costly to the company. Therefore, Brantly intended to go before the board prepared to discuss alternative capital spending levels. This presentation would require $2000$ pro forma financial statements for each of the economic scenarios and comparisons with $1999\text{'}$s financial performance. Since actual $1999$ financial statements would be unavailable prior to the end of the year, he would have to project those as well.

Brantly had spent most of the day gathering the information he needed to complete the $1999$ financial statement projections and had now completed the balance sheets and income statements $($Exhibits $1$ and $2).$ All that remained was to complete the statement of cash flows $($SCF$)$ for $1999$ by applying the indirect method to his recently completed income statement and comparative balance sheet. He knew from the data he had collected that, in $1999$ and $1998,$ principal payments on the long$-$term debt had been $$49$ and $$42$ million, respectively. He also knew that the company had not disposed of any property or equipment in $1998$ but in $1999$ had disposed of a building for $$10$ million cash. That building originally cost $$18$ million and had a book value at the time of the sale of $$10$ million. After reviewing the $1998$ SCF $($Exhibit $3),$ he decided to complete this part of his task before leaving for home that evening.

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Exhibit $1$

COMPTON COMPUTING SYSTEMS $($A$)$

Consolidated Income Statements $($Millions of dollars$)$

$\backslash$table$[[$For the year ended December $31$:$,\backslash$table$[[$Projected$],[{1999}_{?}$