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S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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<PAGE>
 
                     NOTES TO UNAUDITED PRO FORMA COMBINED
                     STATEMENTS OF OPERATIONS--(Continued)
                      For the Year Ended December 31, 1998
 
  (c) Amount represents increased interest expense due to the financings and
      the offerings (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                   Year Ended
                                                                  December 31,
                                                                      1998
                                                                 --------------
      <S>                                                        <C>    <C>
      Historical interest expense, net..........................        $16,409
                                                                        -------
      Senior Subordinated Notes................................. 14,063
      Senior discount notes..................................... 13,500
      Credit facility (1)....................................... 16,386
      Other debt................................................    122
      Amortization of deferred financing fees...................  1,458
                                                                 ------
      Pro forma interest expense................................         45,529
                                                                        -------
      Pro forma adjustment......................................        $29,120
                                                                        =======
</TABLE>

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     (1) If the assumed interest rate on the credit facility increased by
         0.125%, total pro forma interest expense would increase by
         $225,000 for the year ended December 31, 1998.
 
  (d) To remove tax benefits, net, since after the Reorganization two of the
      three Issuers will be treated as partnerships for federal income tax
      purposes (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                     Year Ended
                                                                    December 31,
                                                                        1998
                                                                    ------------
      <S>                                                           <C>
      Pegasus......................................................   $     5
      Taconic......................................................        97
      Cable Michigan...............................................    (2,382)
                                                                      -------
          Total tax (benefit), net.................................   $(2,280)
                                                                      =======
</TABLE>

 
  (e) To eliminate minority interest in loss of Mercom due to the completion
      of the Mercom acquisition of $473,000 for the year ended December 31,
      1998.
 
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