The tax rate is the same as in first quarter 1988 nbspother

Question

The following is supporting analysis for Exhibit 12.

CASH FLOW PROJECTIONS ($000,000)
Sales growth rate	7.2%
Tax rate	41%
	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998
1. Sales	3,582	3,840	4,116	4,413	4,730	5,071	5,436	5,828	6,247	6,697
2. Operating margin	9.20%	9.30%	9.40%	9.50%	9.60%	9.70%	9.80%	9.90%	10.00%	10.10%
3. Operating earnings (1x2)	330	357	387	419	454	492	533	577	625	676
Plus: other income	29	29	29	29	29	29	29	29	29	29
Less: corporate expense	43	43	43	43	43	43	43	43	43	43
4. EBIT	316	343	373	406	440	478	519	563	611	663
5. Taxes	129	140	153	166	180	195	212	230	250	271
6. Net income	187	203	221	240	260	283	307	333	361	392
7. Change in NWC	-	-	-	-	-	40	42	45	49	52
8. Cash flow (6-7)	187	203	221	240	260	243	265	288	313	340

Note:  The tax rate is the same as in first quarter 1988.  Other income and corporate expense is the same as in year ending Feb. 29, 1988. Corporate expense was inferred from Exhibit 8, using interest expense and other income data from Exhibit 7.

The following compares historical operating results to the projections.
	HISTORICAL			PROJECTED
	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998
Net sales	2,832	2,947	3,341
Operating earnings	252	264	301
Operating margin	8.9%	9.0%	9.0%
Curent assets	1,216	1,287	1,359
Current liabilities	250	358	373
Net working capital	966	928	986
NWC as % of sales	34%	32%	30%
Cash	17	17	21
Marketable securities	127	64	11
NWC less cash and securities	822	848	954
Adjusted NWC as % of sales	29%	29%	29%
Sales growth rate		4.0%	13.4%
Net property plant and equipment	442	485	479
Change (=investment less depreciation)		43	(6)	-	-	-	-	-	-	-	-	-	-