Question

Based on the following assumptions, what is the expected Net Income in 2020? Round to the nearest whole dollar

1. Sales projected to grow 25.0% next year
2. CoGS expected to be 40% of sales
3. Interest expense projected to stay fixed at $15
4. SG&A is expected to grow at the same rate it grew as a % of sales in 2019
5. Taxes expected to be 30%

	Income Statement				Balance Sheet
$'s in Millions	2019	2018			2019	2018
Sales	$750	$500		Cash	$1,020	$920
COGs	$325	$200		Accounts Receivables	$610	$200
SG&A	$250	$175		Pre-paid Expenses	$70	$120
Oper. Profit	$175	$125		Fixed Assets	$600	$250
Interest Expense	$15	$50		Goodwill	$100	$250
Income Before Tax	$160	$75		Total Assets	$2,400	$1,740
Tax	$56	$26
Net Income	$104	$49		Accounts Payable	$350	$220
				Accrued Liabilities	$100	$100
				Notes Payable	$100	$80
				Total Liabilities	$550	$400
				Shareholder's Equity	$1,850	$1,340

		$133
		$208
		$164
		$186

Answer 1

Calculating  the expected Net Income in 2020:

Particular	Calculations	2020
Sales	Increase 25% from last year	937
Cost of Goods Sold	40% of sales	375
SG&A	Increase 25% from last year	313
Operating Income		250
interest	Same as last year	15
Taxable Income		235
Taxation @ 30%	Tax rate @ 30%	70
Net income		164

So, Expected Net income of 2020 is $164

hence, Option C. $ 164

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