At the end of last year, Roberts Inc. reported the following income statement (i
ID: 2383268 • Letter: A
Question
At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars):
Looking ahead to the following year, the company's CFO has assembled this information:
Year-end sales are expected to be 7% higher than the $3 billion in sales generated last year.
Year-end operating costs excluding depreciation are expected to equal 70% of year-end sales.
Depreciation is expected to increase at the same rate as sales.
Interest costs are expected to remain unchanged.
The tax rate is expected to remain at 40%.
On the basis of that information, what will be the forecast for Roberts' year-end net income? Enter your answer in millions. For example, an answer of $25,000,000 should be entered as 25. Round your answer to two decimal places.
$ million
Sales $3,000 Operating costs excluding depreciation 2,450 EBITDA $550 Depreciation 250 EBIT $300 Interest 125 EBT $175 Taxes (40%) 70 Net income $105Explanation / Answer
Solution-
PRO FORMA INCOME STATEMENT
(in millions)
Sales
$3,210
Operating Cost
$2,247
EBITDA
$963
Depreciation
$267.50
EBIT
$695.50
Interest Cost
$125
EBT
$570.50
Taxes
$228.20
Net Income
$342.30
Calculation-
Sales = $3,210 ($3000 x 107%)
Operating costs excluding deprecation = $2,247 ($3,210 x 70%)
EBITDA = $963
Depreciation = $267.50 (250 x 107%)
EBIT = $695.50
Interest = $125
EBT = $570.50
Taxes = (40%) $228.20
Net income $342.30
PRO FORMA INCOME STATEMENT
(in millions)
Sales
$3,210
Operating Cost
$2,247
EBITDA
$963
Depreciation
$267.50
EBIT
$695.50
Interest Cost
$125
EBT
$570.50
Taxes
$228.20
Net Income
$342.30
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