Under the assumption that Ideko’s market share will increase by 0.55 percent per year you project the following investment and depreciation:
2005 2006 2007 2008 2009 2010
New Investment 4950 4950 4950 4950 4950 19250
Depreciation (5430) (5382) (5339) (5300) (5265) (6663)
Using this information and the information here project net income through 2010. Assume the corporate tax rate is 35%. Ideko’s income statement for 2005 is shown here
Growth
2005
2006
2007
2008
2009
2010
Sales Data
Market Size (000 units)
4.90%
10000
10490
11004
11543
12109
12702
Market Share
0.55%
10.15%
10.70%
11.25%
11.80%
12.35%
12.90%
Average Sales Price ($/unit)
2.15%
74.02
75.61
77.24
78.9
80.59
82.33
Cost of Goods Data
Raw Materials ($/unit)
1.15%
16.17
16.36
16.54
16.73
16.93
17.12
Direct Labor Costs ($/unit)
4.15%
18.11
18.86
19.64
20.46
21.31
22.19
Operating Expense Data
Sales and Marketing (% sales)
15.16
16.61
18.06
19.51
19.96
19.96
Administrative (% sales)
18.11
15.11
15.11
14.11
13.11
13.11
Interest on Term Loan ($ 000)
(78)
(6755)
(6755)
(6755)
(6755)
(6755)
Estimated 2005 Income Statement
Income Statement ($ 000)
Sales
75130
Cost of Goods Sold
Raw Materials
(16413)
Direct Labor Costs
(18382)
Gross Profit
40335
Sales and Marketing
(11390)
Administrative
(13606)
EBITDA
15339
Depreciation
(5430)
EBIT
9909
Interest Expense (net)
(78)
Pretax Income
9831
Income Tax
(3441)
Net Income
6390
To build the pro forma income statement we begin with Ideko’s sales.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Sales
75130
?
?
?
?
?
The next items in the income statement detail the cost of goods sold.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Raw Materials
(16413)
?
?
?
?
?
The same method can be applied to determine the direct labor costs.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Direct Labor Costs
(18382)
?
?
?
?
?
Gross profit is calculated next.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Gross Profit
40335
?
?
?
?
?
Sales marketing and administrative costs can be computed directly as a percentage of sales.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Sales and Marketing
(11390)
?
?
?
?
?
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Administrative
(13606)
?
?
?
?
?
Next we can project EBITDA over the next five years.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
EBITDA
15339
?
?
?
?
?
Next we arrive at Ideko’s earnings before interest and taxes.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
EBIT
9909
?
?
?
?
?
Next we deduct interest expenses.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Pretax Income
9831
?
?
?
?
?
The final expense is the corporate income tax.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Income Tax
(3441)
?
?
?
?
?
After income taxes we are left with Ideko’s projected pro forma net income as the bottom line.(Round to the nearest $ 000.)
Income Statement ($ 000)
2005
2006
2007
2008
2009
2010
Net Income
6390
?
?
?
?
?
