PRO FORMA INCOME STATEMENT
At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars):
Operating costs excluding depreciation 2,450_
EBITDA $ 550
EBIT $ 300
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?
LONG-TERM FINANCING NEEDED
At year-end 2015, total assets for Ambrose Inc. were $1.2 million and accounts payable were $375,000. Sales, which in 2015 were $2.5 million, are expected to increase by 25% in 2016. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Ambrose typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2015, and retained earnings were $295,000. Ambrose plans to sell new common stock in the amount of $75,000. The firm’s profit margin on sales is 6%; 60% of earnings will be retained.
- What were Ambrose’s total liabilities in 2015?
- How much new long-term debt financing will be needed in 2016? (Hint: AFN − New stock = New long-term debt.)
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