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"Bruto's sales for year 2019 were $110 millions of dollars. For that year the cost of...

"Bruto's sales for year 2019 were $110 millions of dollars. For that year the cost of sales without depreciation was 25%, the value of depreciation was 8% the value of sales, and interest expense was 25 millions of USD.Assuming that the income tax for the company is 35%, that sales are expected to increase in 35%, and that interest expense will remain constant at the 2019 levels, what is the company's forecast for Net Income in 2020, in millions of dollars?

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Answer #1

Calculation of Company's forecast for Net Income in 2020: (Amount is in million dollars)

Particulars Amount in 2019 (1) % of increase/(decrease) (2) Amount of increase/(decrease) (3) Amount in 2020 (4)
Sales 110 35% 110*35%= 38.5

110+38.5

148.5
(-) Cost of sales @25% (B)

(110*25%)

27.5

 25% of sales (148.5*25%)=37.12 37.12
Gross profit (C) 82.5 111.37
Depreciation (D)

(110*8%)

8.8

 8% of sales (148.5*8%)=11.88 11.88
EBIT (E) (C-D) 73.7 99.49
Interest (F) 25 constant 25
EBT (G) (E-F) 48.7 74.49
Tax (H)

(48.7*35%)

17.04

 (74.49*35%) 26.07 26.07
Net Income (I) (G-H) 31.66 48.42

Net income in 2020 = 48.42 million dollars

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