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PRO FORMA INCOME STATEMENT At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars): Sales $3,000 Operating costs excluding depreciation 2,450 EBITDA $ 550 Depreciation 250 EBIT $ 300 Interest 125 EBT $ 175 Taxes (40%) 70 Net income $ 105 Looking ahead to the following year, the company's CFO has assembled this information: Year-end sales are expected to be 10% higher than the $3 billion in sales generated last year. Year-end operating costs, excluding depreciation, are expected to equal 80% of year-end sales. Depreciation is 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 that information, what will be the forecast for Roberts’ year-end net income?

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

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Section
Chapter 17, Problem 7P
Textbook Problem

PRO FORMA INCOME STATEMENT At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars):

Sales $3,000
Operating costs excluding depreciation 2,450
EBITDA $ 550
Depreciation 250
EBIT $ 300
Interest 125
EBT $ 175
Taxes (40%) 70
Net income $ 105

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

  • Year-end sales are expected to be 10% higher than the $3 billion in sales generated last year.
  • Year-end operating costs, excluding depreciation, are expected to equal 80% of year-end sales.
  • Depreciation is 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 that information, what will be the forecast for Roberts’ year-end net income?

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