Question 1. Prepare a pro forma income statement and balance sheet for Webb Enterprises (see balance sheet and income statement below), where revenues are expected to grow by 20% in 2016. Make the following assumptions in making your forecast of the firm's balance sheet for 2016:

The income statement expenses are a constant percentage of revenues except for interest, which remains equal in dollar amount to the 2015 level, and taxes, which equal 40% of earnings before taxes.

The cash and marketable securities balance remains equal to $500, and the remaining current assets accounts increase in proportion to revenues for 2015.

Net property, plant, and equipment increase in proportion to the increase in revenues and depreciation expenses for 2016 is $2,000.

Accounts payable increases in proportion to firm revenues.

Owner's equity increases by the amount of firm net income for 2011 (no cash dividends are paid).

Long-term debt remains unchanged, and short-term debt changes in an amount that balances the balance sheet.

Question 2. Using your pro forma financial statements from question 1, estimate the firm's FCF for 2016.

Balance Sheet	2015
Cash and marketable securities	$500
Accounts receivable	$6,000
Inventories	$9,500
Current assets	$16,000
Net property, plant, & equipment	$17,000
Total	$33,000
Accounts payable	$7,200
Short term debt	$6,800
Current liabilities	$14,000
Long-term Debt	$7,000
Total liabilities	$21,000
Total owners equity	$12,000
Total liabilities and owners equity	$33,000

Income Statement	2015
Revenues	$30,000
Cost of goods sold	($20,000)
Gross profit	$10,000
Operating expenses	($8,000)
Net operating income	$2,000
Interest expense	($900)
Earnings before taxes	$1,100
Taxes	($400)
Net Income	$700