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):

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

Year-end sales are expected to be 8% higher than the $3 billion in sales generated last year.

Year-end operating costs excluding depreciation are expected to equal 65% 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.

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

Explanation / Answer

forecast for Roberts' year-end net income is $299.40 million

Notes:

1. Sales = $3000 + 8%*3000 = $3240

2. Operating Expenses = 65% * 3240 = $2106

3. Depreciation = 250 + 8%*250 = $270

Sales $3,000 Operating costs excluding depreciation 2,106 EBITDA $894 Depreciation 270 EBIT $624 Interest 125 EBT $499 Taxes (40%) 199.60 Net income $299.40

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