Question

5. Problem 17.07 (Pro Forma Income Statement) eBook At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars): $3,000 2,450 Sales Operating costs excluding depreciation EBITDA Depreciation $550 250 EBIT Interest $300 125 $175 70 EBT Taxes (40%) Net income $105 Looking ahead to the following year, the company's CFO has assembled this information: • Year-end sales are expected to be 9% higher than the $3 billion in sales generated last year. • Year-end operating costs, excluding depreciation, are expected to equal 70% 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%. On the basis of that information, what will be the forecast for Roberts' year-end net income? Enter your answer in millions. For example, an answer of $25,400,000 should be entered as 25.40. Round your answer to two decimal places. million Save & Continue Continue without saving

Answer 1

Calculate the forecasted net income as follows:

A B 437 438 439 440 441 Current year Forecasted $3,000.00 $3,270.00 $2,450.00 $2,289.00 $550.00 $981.00 $250.00 $272.50 $300.00 $708.50 $125.00 $125.00 $175.00 $583.50 $70.00 $233.40 $105.00 $350.10 Sales Operating cost EBITDA Depreciation EBIT Interest EBT taxes 40% Net income 442 443 444 445 446

Net income = $350.10

Formulas:

A. в 437 438 439 Sales Operating cost EBITDA Depreciation EBIT Interest 440 441 442 443 444 445 446 Current year 3000 2450 =C438-C439 250 =C440-C441 125 =C442-C443 =C444*40% =C444-C445 Forecasted =C438*(1+9%) =D438*70% =D438-D439 =C441*(1+9%) =D440-D441 125 EBT taxes 40% Net income =D442-D443 =D444*40% =D444-0445