Question

35. Given Corporation had sales this year of $3,500 million, and sales are expected to grow by 15 percent next year. Next year Given expects cost of goods sold to be 40 percent of sales, selling expenses to be $35 million per month, depreciation to be $8 million per month, and interest expense to be $18 million per month. Taxes are computed at 35 percent. What is Given’s expected net income next year?

    1. $1,026 million.

    2. $1,314 million.

    3. $1,426 million.

    4. $1,578 million.

Answer 1

Given about a corporation,

Sales last year = $3500 million

next year sales is expected to grow at 15%

So, sales next year = $3500*1.15 = $4025 million

Cost of goods sold = 40% of sales = 0.4*4025 = $1610 million

Monthly selling expenses = $35 million

Monthly depreciation = $8 million

Monthly interest expenses = $18 million

tax rate = 35%

So, next year's selling expenses = 35*12 = $420 million

next year's depreciation - 8*12 = $96 million

next year's interest expenses = 18*12 = $216 million

So, net income next year = (Sales - COGS - selling exp - Dep - Interest)*(1-tax rate)

=> Next year's net income = (4025 - 1610 - 420 - 96 - 216)*(1-0.35) = $1094

Given the data, Net income next year should be $1094 million

There must be some misprint in the question. Request you to please check the values.