Estimating Sales and Profit after tax
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 $110 Million?
https://brainmass.com/business/business-math/estimating-sales-profit-after-tax-233489
SOLUTION This solution is FREE courtesy of BrainMass!
Solution:
a) What is your estimate for 2008 sales ($)?
Total Market for ties= 10 millions units
Target market share=20%
Expected sales = 10*20% million ties
=2 million ties
Sale volume in $=Expected sales*average selling price
=$2*300 million
=$600 million
b) What is your estimate of 2008 profits after tax?
Sale Revenue =$600 million
Total expenses=60% of sales
=$600*60% million
=$360 million
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%
https://brainmass.com/business/business-math/estimating-sales-profit-after-tax-233489