Students are asked to prepare forecasted financial statements as part of a due diligence review for deciding whether to purchase a ten percent equity position in Bastion Finance. To prepare the statements they must make several assumptions about future events. Past operating data gives some guidance for these assumptions but there is still a great deal of judgment required. In the process of preparing the forecasts students should become aware of some risks that were not previously obvious. These risks need to be evaluated to determine whether the investment is acceptable.