Can someone direct me on how to proceed?  Please explain why.  I have
to learn how to proceed with a problem like this.

Question #2
Income Statement			Sources and Uses of Funds
Revenue	$1785			        Sources:
Fixed Costs	       53		     Operating cash flow  $200
Variable Cost	$1428			     Borrowing                     36
(80% of revenue)		             Stock issues	     104
Depreciation	       80			Total Sources		    $340
Interest 	       24
(at 11.8%)			         Uses:
Tax (at 40%)	       80		Increase in net working capital	$60
Net Income	   $120			       Investment	    $200
					       Dividends		        80
					Total uses		    $340					
Balances Sheet, Year-end		2004		2005
Assets:
     Net working capital		$400		$340
     Fixed assets			  800		  680
Total assets				$1200		$1020

Liabilities:
     Debt				$240		$204
     Book equity			  960		  816
Total Liabilities			$1200		$1020


The 2004 financial statements for the Executive Cheese Company. Annual
depreciation is 10 percent of fixed assets at the beginning of the
year, plus 10 percent of new investment. The company plans to invest a
further $200 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 percent 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 percent.
1)  Construct a model for Executive Cheese.
2)  Use your model to produce a set of financial statements for 2005.