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Estimating Sales and Profit after tax

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The company is "Ties for U" and my boss wants to estimate profits for next year(2008) and then determine the percentage growth from 2007 to 2008.

Some assumptions:
- The marketing folk expect the total market for ties in 2008 to be 10 million ties.
- The expect "Ties for U" to capture 20% of the market next year.(how many ties will "Ties for U" sell?)
- The average selling price for "Ties for U" is $300.(now you can calculate the sales)
- Total expenses(cost of goods, marketing etc) estimated to be 60% of sales.
- Tax rate on profits is 50%

Questions:

What is your estimate for 2008 sales($)?
What is your estimate of 2008 profits after tax?
What is the percentage increase in 2008 profits after tax vs 2007 profit after tax of $110 Million?

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Solution Summary

Solution describes the steps for estimating sales, after tax profits and percentage increase in after tax profits.

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Solution:

a) What is your estimate for 2008 sales ($)?

Total Market for ties= 10 millions units
Target market share=20%
Expected sales = 10*20% million ties
=2 million ties

Sale volume in $=Expected ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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