Under the assumption that Ideko's market share will increase by 0.55 percent per year, you project the following investment and depreciation:
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 4,950 4,950 4,950 4,950 4,950 19,250
Depreciation (5,430) (5,382) (5,339) (5,300) (5,265) (6,663)
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
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| Growth | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Sales Data |
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| 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 ($/unit) | 2.15% | 74.02 | 75.61 | 77.24 | 78.9 | 80.59 | 82.33 |
| Cost of Goods Data |
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| Raw Materials ($/unit) | 1.15% | 16.17 | 16.36 | 16.54 | 16.73 | 16.93 | 17.12 |
| Direct Labor Costs ($/unit) | 4.15% | 18.11 | 18.86 | 19.64 | 20.46 | 21.31 | 22.19 |
| Operating Expense Data |
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| Sales and Marketing (% sales) |
| 15.16 | 16.61 | 18.06 | 19.51 | 19.96 | 19.96 |
| Administrative (% sales) |
| 18.11 | 15.11 | 15.11 | 14.11 | 13.11 | 13.11 |
| Interest on Term Loan ($ 000) |
| (78) | (6,755) | (6,755) | (6,755) | (6,755) | (6,755) |
| Estimated 2005 Income Statement | |
| Income Statement ($ 000) | |
| Sales | 75130 |
| Cost of Goods Sold | |
| Raw Materials | (16,413) |
| Direct Labor Costs | (18,382) |
| Gross Profit | 40335 |
| Sales and Marketing | (11,390) |
| Administrative | (13,606) |
| EBITDA | 15339 |
| Depreciation | (5,430) |
| EBIT | 9909 |
| Interest Expense (net) | (78) |
| Pretax Income | 9831 |
| Income Tax | (3,441) |
| 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 | 75,130 |
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 | (16,413) |
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 | (18,382) |
Gross profit is calculated next. (Round to the nearest $ 000.)
| Income Statement ($ 000) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Gross Profit | 40,335 |
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 | (11,390) |
| Income Statement ($ 000) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Administrative | (13,606) |
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 | 15,339 |
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 | 9,909 |
Next, we deduct interest expenses. (Round to the nearest $ 000.)
| Income Statement ($ 000) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Pretax Income | 9,831 |
The final expense is the corporate income tax. (Round to the nearest $ 000.)
| Income Statement ($ 000) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Income Tax | (3,441) |
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 | 6,390 |
