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# Forcasting Net Income based on given estimates

At the end of last year, company a 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 percent higher then the \$3 BILLION IN SALES GENERATED LAST YEAR.

Year end opeating costs , excluding depreciation, are expected to equal 80 percent of year-end sales.

Depreciation is expected to increase at the same rate as sales.

Interest costs are expected to remain unchanged.

The tax rate is expected to remain at 40 percent.

Given this information, what will be the forecast for company A's year end net income? Please show calculations.

#### Solution Preview

Solution is attached herewith.

Solution

Expected Sales 10% increase 3300 millions
Operating costs 80% of sales 2640 millions
Depriciation 10% increase ...

#### Solution Summary

Solution describes the steps in forcasting Net Profit for the year based on given information.

\$2.19