Question

This experiential exercise involves creating a pro forma Balance Sheet and a pro forma Income Statement for XYZ Company. Assume the current year is 2015. To assist you in this endeavor, an Excel worksheet containing XYZ’s 2014 Income Statement and Balance Sheet has been provided. Develop the two pro forma financial statements for 2015 based upon the following assumptions:
     The company plans to increase sales by an additional 2 percent in 2015 due to minor price increases. In addition, the firm plans to launch a massive marketing campaign in Asia. The campaign is anticipated to cost $100,000,000 and to add an additional $500,000,000 in sales during 2015.
     The company plans to invest an additional $400,000,000 in additional research and development in 2015. New plant and equipment  is projected to cost $500,000,000, and will be depreciated over 20 years. (Note: Assume the plant and equipment come on line the first day of 2013). Salaries for new employees are estimated at $50,000,000 for 2013.
     The company plans to finance construction of the new facilities by taking on $500,000,000 in long-term debt. The terms of the transaction include a 10-year balloon loan at 5 percent interest. Interest payments are due on December 31 for each of the next ten years.
     The company anticipates issuing 100,000,000 new shares of common stock. The firm currently has 296,330,000 outstanding shares of common stock. The new shares are expected to sell for $350 per share. The new offering is expected to occur on January 1, 2015. PLEASE SHOW FORMULAS ON HOW TO CALCULATE THESE.

XYZ Pro Forma Income Statement	12/31/14	12/31/15
(Values in Thousands)
Total Revenue	6,138,560	6,761,331
Cost of Revenue, Total	2,577,088
Gross Profit	3,561,472
Operating Expenses
Selling, General and Administrative Expenses	854,684
Research & Development	599,510
Depreciation/Amortization	0
Non Recurring	90,000
Total Operating Expenses	1,544,194
Operating Income or Loss	2,017,278
Income from Continuing Operations
Total Other Income/Expenses Net	125,175
Earnings Before Interest and Taxes	2,142,453
Interest Expense	776
Income Before Tax	2,141,677
Income Tax Expense	676,280
Net Income from Continuing Operations	1,465,397
Net Income	1,465,397
Preferred Stock and Other Adjustments	0
	0
Net Income Applicable To Common Shares	1,465,397
Source: Yahoo! Finance

  

XYX Pro Forma Balance Sheet	12/31/14	12/31/15
(Values in Thousands)
Assets
Current Assets
Cash and Equivalents	4,173,211
Short Term Investments	4,157,073
Net Receivables	737,317
Inventory	0
Other Current Assets	229,507
Total Current Assets	9,297,108
Long Term Investments
Property, Plant and Equipment, Gross	961,749
Goodwill	194,900
Intangible Assets	82,783
Less: Accumulated Depreciation	0
Other Assets	31,310
Total Non-Current Assets	1,270,742
Total Assets	10,567,850
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable	672,285
Short/Current Long Term Debt	0
Other Current Liabilities*	73,099
Total Current Liabilities	745,384
Non-Current Liabilities
Long Term Debt	0
Deferred Income Taxes*	61,585
Deferred Long Term Liability Charges	45,887
Minority Interest*	0
Total Non-Current Liabilities	107,472
Total Liabilities	852,856
Shareholders' Equity
Preferred Stock Equity*	0
Common Stock Equity	296,330
Retained Earnings	2,055,868
Capital Surplus	7,477,792
Other Stockholder Equity	-114,996
Total Stockholders' Equity	9,714,994
Total Liabilities/Stockholders Equity	10,567,850
Source: Yahoo! Finance

Answer 1

SOLUTION:-

Proforma Income Statement	2014	2015
Total revenue	6138560	6761331.2
Cost of revenue	2577088	3768075
Gross profit	3561472	2993256.2
Operating Exp
Adminst Exp	854684	10048384
R & D	599510	999510
Depreciation	0	25000
Non recurring	90000	90000
Total Operating Exp	1544194	2118894
Operating Income / Loss	2017278	874362.2
Income from continue operations
Total other Inc / Exp	125175	125175
Earning before Interest & tax	2142453	749187.2
Interest Exp	776	801
Inc of before tax	2141617	748386.2
Inc tax Expense	676280.	236318.8
Net Inc	1465397	512067.4
Preferred stock & other adjust	0	0
Net income to common shares	1465397	512067.4

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