Question

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	$

Answer 1

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