Question

Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars):

Sales	$4,230
Operating costs excluding depreciation	3,098
EBITDA	$1,132
Depreciation	325
EBIT	$807
Interest	160
EBT	$647
Taxes (40%)	259
Net income	$388

Looking ahead to the following year, the company's CFO has assembled this information:

• Year-end sales are expected to be 6% higher than $4.23 billion in sales generated last year.
• Year-end operating costs, including depreciation, are expected to increase at the same rates as sales.
• Interest costs are expected to remain unchanged.
• The tax rate is expected to remain at 40%.

On the basis of this information, what will be the forecast for Edwin's year-end net income? Round your answer to the nearest whole million. Do not round intermediate calculations. Enter all values as positive numbers.

	(in millions of dollars)
Sales	$
Operating costs including depreciation
EBITDA	$
Depreciation
EBIT	$
Interest
EBT	$
Taxes
Net income	$

Answer 1

Preparing the Income Statement:-

Particular	Calculations	Amount in millions of $
Net Sales	=4230*(1+6%)	4483.80
Less: Costs of Goods Sold	=3098*(1+6%)	3283.88
EBITDA		1199.92
Less: Depreciation	=325*(1+6%)	344.50
EBIT		855.42
Interest Expenses	Unchanged	160.00
Earning before tax		695.42
Less: Taxes @40%		278.17
Net Income		417.25

So, Forecasted year end Net Income = $417.25 millions

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