Question

# 2017 2018 2019 Revenue 1,250.0 1,300.0 1,358.5 COGS 900.0 942.5 982.2 Depreciation 123.0 145.0 155.0 SG&A...

 2017 2018 2019 Revenue 1,250.0 1,300.0 1,358.5 COGS 900.0 942.5 982.2 Depreciation 123.0 145.0 155.0 SG&A 177.5 189.8 195.6 R&D 41.3 39.0 42.1 Operating Income 8.3 -16.3 -16.4

1. Given the following historical values (all number are in Millions of US Dollars). Estimate the firm’s 2020 revenue and COGS values. Explain your approach and justify your answer.

For all the three years 2017,2018 and 2019, COGS as a percentage of revenue is 72%.

COS as a percentage of Revenue= [COGS/Revenue]*100

 Year Percentage 2017 [900/1250]*100 2018 [942.5/1300]*100 2019 [982.2/1358.5]*100

So, lets assume that this will continue in 2020

Revenue growth for 2018 is [(1300-1250)/1250]*100=4%

Revenue growth for 2019 is [(1358.5-1300)/1300]*100=4.5%

Average sales growth =[4+4.5]/2=4.25%

Estimated revenue for 2020= 1358.5*104.25%=1416.24

Therefore COGS= 1416.24*72%=1020

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