Question

Score: 0 of 1 pt 8 of 11 (10 complete) HW Score: 90.91%, 10 of 11 pts 18-14 (similar to) Question Help Under the assumption that KMS's market share will increase by 0.23% per year, you determine that the plant will require an expansion in 2018. The expansion will cost $21.5 million. Assume the following: the debt financing of the expansion will be delayed accordingly (end of 2018). KMS uses a ten-year bond, interest rates remain the same at 7.3%, and KMS's tax rate is 35%. KMS projects the following depreciation: 2017 2016 $5,522 2018 $7,425 2020 $7,543 2021 $7,586 Depreciation (000) $5,465 $7.439 Using this information and the data given here in project net income through 2021. The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career Complete the following to determine the net income for each year: (Round to the nearest Integer.) 2016 Income Statement (000) Sales $ 74,950 (60,710) Cost of Goods Sold EBITDA Depreciation EBIT Interest Expense Pre-tax Income Taxes Net Income Enter any number in the edit fields and then click Check Answer.

Answer 1

	2016	2017	2018	2019	2020	2021
Sales	74,950	82,415	90,425	99,520	108,601	119,020
COGS	-      60,710	-      66,756	-      73,244	-      80,611	-         87,967	-         96,406
EBIDTA	16,256	17,676	19,199	20,928	22,654	24,635
Depreciation	-         5,522	-         5,465	-         7,425	-         7,439	-           7,543	-           7,586
EBIT	10,734	12,211	11,774	13,489	15,111	17,049
Interest	-            349	-            349	-            349	-         1,918	-           1,918	-           1,918
Pre-Tax Income	10,385	11,862	11,425	11,571	13,193	15,131
Taxes	-         3,635	-         4,152	-         3,999	-         4,050	-           4,618	-           5,296
Net Income	6,750	7,710	7,426	7,521	8,575	9,835

Taxes are 35% of Pre-Tax Income.

Depreciation and interest costs, as reported has been considered.

Even though 100% depreciation can be taken for tax purpose, we have calculated as required in the question.