Question

In: Finance

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

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

Sales $4,290.00
Operating costs (excluding depreciation) 3,058.00
EBITDA $1,232.00
Depreciation 345.00
EBIT $887.00
Interest 130.00
EBT $757.00
Taxes (40%) 302.80
Net income $454.20

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

  • Year-end sales are expected to be 5% higher than $4.29 billion in sales generated last year.
  • Year-end operating costs, excluding depreciation, are expected to increase at the same rates as 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 as positive values. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places.

Edwin Inc.
Income Statement
(in millions of dollars)
Sales $  
Operating costs (excluding depreciation)    
EBITDA $  
Depreciation    
EBIT $  
Interest    
EBT $  
Taxes (40%)    
Net income $  

Solutions

Expert Solution

Solution:

Statement showing forecasted  Edwin's year-end net income

Amount(in millions of dollars)
Sales($4290*1.05) $4504.50
Operating Cost(3,058*1.05) $3210.90
EBITDA $1,293.60
Depreciation(345*1.05) $362.25
EBIT $931.35
Interest $130.00
EBT $801.35
Taxes @40% $320.54
Net Income $480.81

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