Question

Sales	$4,100.00
Operating costs excluding depreciation	3,053.00
EBITDA	$1,047.00
Depreciation	300.00
EBIT	$747.00
Interest	170.00
EBT	$577.00
Taxes (40%)	230.80
Net income	$346.20

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

• Year-end sales are expected to be 4% higher than $4.1 billion in sales generated last year.
• Year-end operating costs, excluding depreciation, will equal 80% of sales.
• Depreciation costs are 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 this information, what will be the forecast for Edwin's year-end net income? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Enter all values as positive numbers. Do not round intermediate calculations. Round your answers to two decimal places.

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

Answer 1

Preaparing the Income Statement:-

Particular	Calculations	Amount in millions of $
Net Sales	=4100*(1+4%)	4,264.00
Less: Costs of Goods Sold	=4264*80%	3,411.20
EBITDA		852.80
Less: Depreciation	=300*(1+4%)	312.00
EBIT		540.80
Interest Expenses	Unchanged	170.00
Earning before tax		370.80
Taxes @40%		148.32
Net Income		222.48

So, Forecasted year end Net Income = $222.48 millions