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Below is the Income statement for Company X 1)Forecast the firm’s Earnings per s

ID: 2820432 • Letter: B

Question

Below is the Income statement for Company X

1)Forecast the firm’s Earnings per share and cash flow per share by filling in the box below.

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Start with the most recent income statement and common size it. For the forecast period, adjust the numbers for future growth and decline in sales. Other items in income statement should be based on adjustments to past ratios.

Income Statement

FY 2014

FY 2015

FY 2016

FY 2017

ASSUMPTIONS (% OF Revenue)

Assumed Growth Rate in %

Total Revenue

Cost of Revenue

Gross Profit

Total Operating Expense

Operating Income

Other Income, Net

EBIT

Interest Expense

Net Income From Continuing Ops

Non-Recurring Events

Discontinued Op

Income from non-controlling int.

Net Income

EPS

DPS

Shares Outstanding 5 1.18B

Explanation / Answer

Common-size statement:

Past-ratios for other items calculated as below, to forecast for FY18, FY19, FY20 in the last column (taken average for the last 3 years, to be used as % forecast for next 3 years)

Below items are forecasted at these average rates for next 3 years

Forecast for FY18, FY19, FY20 as below:

Common size All numbers in thousands Revenue 12/31/2017 12/31/2016 12/31/2015 12/31/2014 Total Revenue 100.00% 100.00% 100.00% 100.00% Cost of Revenue 54.05% 52.58% 48.97% 47.44% Gross Profit 45.95% 47.42% 51.03% 52.56% Operating Expenses Research Development 7.28% 7.69% 8.56% 9.31% Selling General and Administrative 17.44% 18.42% 19.57% 21.02% Non Recurring - - - - Others 0.70% 0.85% 0.99% 1.15% Total Operating Expenses 85.38% 85.37% 83.68% 84.20% Operating Income or Loss 14.62% 14.63% 16.32% 15.80% Income from Continuing Operations Total Other Income/Expenses Net 2.18% 0.42% -0.23% -0.09% Earnings Before Interest and Taxes 14.62% 14.63% 16.32% 15.80% Interest Expense - - - - Income Before Tax 16.80% 15.04% 16.09% 15.71% Income Tax Expense 3.09% 2.12% 2.81% 10.49% Minority Interest - - - - Net Income From Continuing Ops 13.71% 12.92% 13.28% 5.22% Non-recurring Events Discontinued Operations - - - - Extraordinary Items - - - - Effect Of Accounting Changes - - - - Other Items - - - - Net Income Net Income 13.71% 12.92% 13.28% 5.22% Preferred Stock And Other Adjustments - - - - Net Income Applicable To Common Shares 13.71% 12.92% 13.28% 5.22%
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