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    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 Preview

    Please refer attached Excel file for better clarity of calculations and tables.


    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 : ...

    Solution Summary

    Solution describes the steps in findind projected net income based on estimates for sales, operating costs, depriciations etc.