Pro forma income statement At the end of last year, Roberts Inc. reported the fo

Question

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 11% higher than the $3 billion in sales generated last year. Year-end operating costs excluding depreciation are expected to equal 85% 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? Enter your answer in millions. For example, an answer of $25,000,000 should be entered as 25. Round your answer to two decimal places.

Explanation / Answer

The year-end net income has been calculated with the use of following table:

Forecasted net income would, therefore, be $58.20 million.

Actual Forecast Basis Proforma Sales 3,000 *(1+11%) 3,330 (3,000*(1+11%)) Operating Costs Excluding Depreciation 2,450 *85% Sales 2,830.50 (3,330*85%) EBITDA 550 499.50 Depreciation 250 *(1+11%) 277.50 (250*(1+11%)) EBIT 300 222 Interest 125 125 EBT 175 97 Taxes (40%) 70 38.80 Net Income $105 $58.20

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