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.
- 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 $300.(now you can calculate the sales)
- Total expenses(cost of goods, marketing etc) estimated to be 60% of sales.
- Tax rate on profits is 50%
What is your estimate for 2008 sales($)?
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 $110 Million?
SOLUTION This solution is FREE courtesy of BrainMass!
a) What is your estimate for 2008 sales ($)?
Total Market for ties= 10 millions units
Target market share=20%
Expected sales = 10*20% million ties
=2 million ties
Sale volume in $=Expected sales*average selling price
b) What is your estimate of 2008 profits after tax?
Sale Revenue =$600 million
Total expenses=60% of sales
Operating Profit= Sale Revenue-Total expenses
=600-360 =$240 million
Tax liability = 50% of operating profit
=240*50% =$120 million
Profit after tax=240-120=$120 million
c) What is the percentage increase in 2008 profits after tax vs 2007 profit after tax of $110 Million?
After tax profit in 2007=$110 million
After tax profit in 2008=$120 million
% increase in profit =(120-110)/110=9.09%