At the end of last year, Edwin Inc. reported the following income statement (in

Question

At the end of last year, Edwin 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 6% higher than $4.12 billion in sales generated last year.

Year-end operating costs, including depreciation, are expected to increase at the same rates as sales.

Interest costs are expected to remain unchanged.

The tax rate is expected to remain at 40%.

On the basis of this information, what will be the forecast for Edwin's year-end net income? Round your answer to the nearest whole million. Do not round intermediate calculations. Enter all values as positive numbers.

Sales $4,120 Operating costs excluding depreciation 3,062 EBITDA $1,058 Depreciation 320 EBIT $738 Interest 130 EBT $608 Taxes (40%) 243 Net income $365

Explanation / Answer

The assumptions taken as per details given are enumerated below

Year-end sales are expected to be 6% higher than $4.12 billion in sales generated last year.

Year-end operating costs, including depreciation, are expected to increase at the same rates as sales.

Interest costs are expected to remain unchanged.

Interest costs are expected to remain unchanged.

Sales

Last year current year forecast (Amount in millions) rate of growth (Amount in millions)

Sales

$4,120 106% $4,367 Operating costs excluding depreciation 3,062 106% $3,246 EBITDA $1,058 $1,121 Depreciation $320 106% $339 EBIT $738 $782 Interest $130 $130 EBT $608 $652 Taxes (40%) 243 $261 Net income $365 $391

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