Pro Forma Case Study

Assumptions. We build pro-forma statement mostly based on the assumptions given in the case. Other assumptions are following. At first, we assume that the tax rate is an average of tax rates for the past three years which is 20.1%. We use this tax rate to calculate the provision for income taxes for following years. Next assumption is that we take Mr. Dadge’s approximation for the initial rate as the interest rate, 11%. Since Mr. Clarkson finished payment to Mr. Holtz in 1995, we assume that only the bank loan to Suburban National Bank and Northrup National Bank are the interest-bearing liabilities for 1996 through 1999. For account payable period, we calculated two numbers, 53.62 days for 1995 and 54.86 for the first quarter of 1996. We used