Forcast of Net Income based on Estimated changes
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At the end of last year, Firm c reported the following income statement (in millions of dollars)
Sales 3,000
Operating costs excluding depreciation 2,450
EBITDA 550
Depreciation 250
EBIT 300
Interest 125
EBT 175
Taxes (40%) 70
Net Income 105
Looking ahead to the following year, the company's CFO has assembled the following information;
Year end sales are expected to be 10% higher than the $3 billion in sales generated last year.
Year end operating costs, excluding depreciation, are expected to equal 80 percent of year end sales.
Depreciation is expected to increase at the same rate of 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 Company c's year-end net income?
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Solution Summary
Solution describes the steps in findind projected net income based on estimates for sales, operating costs, depriciations etc.
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Please refer attached Excel file for better clarity of calculations and tables.
Solution
All figures in million dollars
Let us study the effect of various forcasts
Expected sales: 10% increase : 3300
Expected Operating costs excluding depreciation : 80% of sales : ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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