Problem 16-7. Pro forma income statement At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars):

Sales 3000
Operating costs excluding depreciation 2450
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 the following information:

--Year-end sales are expected to be 7% 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 this information, what will be the forecast for Roberts' year-end net income? Round the answer to the nearest hundredth.

I'm having trouble figuring out the correct net income for this problem!!!

Hope anyone can help me!!!
Thanks!!!
Laura

Due to a techincal breakthrough,theb fix costs for a firm drop by 25%. Prior to this breakthrough fixed costs were 100,000 and unit contribution margin was and remains at 5.00. The new amount of break-even units will be:

(in million of dollars)


Sales $3,300
($3000 M * 10%)

Operating Cost including depreciation ($2,640)
(Operatinc Cost excluding Dep will equl to 80% ofSales)

EBIT & D $660

Depreciation (10%) $66

EBIT $594

Interest ($125)

EBT $469

Income Tax (40%) ($187.60)

Net Income $281.40

Robert's year end net income is $156 million

year end balance for receivables is 32.77 million

year end days sales outstanding (DSO) ratio is 36 days

To find the forecast for Roberts' year-end net income, we need to calculate the relevant values based on the given information.

1. Year-end sales:
Given that the year-end sales are expected to be 7% higher than the $3 billion in sales generated last year, we can calculate the expected year-end sales as follows:
Year-end sales = $3 billion + (7% * $3 billion) = $3 billion + $210 million = $3.21 billion

2. Year-end operating costs excluding depreciation:
Given that year-end operating costs excluding depreciation are expected to equal 65% of year-end sales, we can calculate the expected year-end operating costs as follows:
Year-end operating costs = 65% * Year-end sales = 65% * $3.21 billion = $2.0865 billion

3. Depreciation:
Given that depreciation is expected to increase at the same rate as sales, we can calculate the expected depreciation as follows:
Expected depreciation = Depreciation last year + (7% * Depreciation last year) = $250 million + (7% * $250 million) = $250 million + $17.5 million = $267.5 million

4. Interest costs:
Given that interest costs are expected to remain unchanged, the forecasted interest costs will be the same as last year, which is $125 million.

5. Taxes:
Given that the tax rate is expected to remain at 40%, we can calculate the expected taxes as follows:
Expected taxes = 40% * EBT (earnings before taxes) = 40% * $175 million = $70 million

6. Net income:
Now we can calculate the forecast for Roberts' year-end net income based on the above information:
Net income = EBT - Taxes = $175 million - $70 million = $105 million

Therefore, the forecast for Roberts' year-end net income is $105 million.

To determine the forecast for Roberts' year-end net income, we need to calculate each component of the income statement based on the given information.

1. Year-end Sales:
Given that year-end sales are expected to be 7% higher than the previous year's sales of $3 billion, we can calculate the forecasted sales as follows:

Forecasted sales = $3 billion + (7% * $3 billion)
= $3 billion + ($0.07 * $3 billion)
= $3 billion + $210 million
= $3.21 billion

2. Year-end Operating Costs Excluding Depreciation:
The information provided states that operating costs excluding depreciation are expected to be 65% of year-end sales. Therefore, we can calculate the forecasted operating costs excluding depreciation as follows:

Forecasted operating costs excluding depreciation = 65% * $3.21 billion
= 0.65 * $3.21 billion
= $2.0865 billion

3. Depreciation:
Given that depreciation is expected to increase at the same rate as sales, we can calculate the forecasted depreciation as follows:

Forecasted depreciation = ($250 million / $3 billion) * $3.21 billion
= $250 million * (1.07)
= $267.5 million

4. EBITDA:
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is calculated by subtracting depreciation from EBIT (Earnings Before Interest and Taxes). Therefore, we can calculate the forecasted EBITDA as follows:

Forecasted EBITDA = $550 million - $267.5 million
= $282.5 million

5. Interest:
The problem states that interest costs are expected to remain unchanged, so the forecasted interest remains the same:

Forecasted interest = $125 million

6. EBT (Earnings Before Taxes):
EBT (Earnings Before Taxes) is calculated by subtracting interest from EBIT. Therefore, we can calculate the forecasted EBT as follows:

Forecasted EBT = $300 million - $125 million
= $175 million

7. Taxes:
The tax rate is expected to remain at 40%. Therefore, we can calculate the forecasted taxes as follows:

Forecasted taxes = 40% * $175 million
= 0.4 * $175 million
= $70 million

8. Net income:
Net income is calculated by subtracting taxes from EBT. Therefore, we can calculate the forecasted net income as follows:

Forecasted net income = $175 million - $70 million
= $105 million

Therefore, the forecasted year-end net income for Roberts Inc. is $105 million.

Note: The given information about the fixed costs and unit contribution margin is unrelated to the question about Roberts' net income, so it is not relevant here.