Question

a proposed new investment has projected sales of $571,000. variable costs are 36 percent of sales, and fixed costs are $132,500; depreciation is $51,750. prepare a pro forma income statement assuming a tax rate of 22 percent. what is the projected net income? (input all amounts as positive values. do not round intermediate calculations.)

Answer 1

Pro forma income statement is used to calculate the financial forecast of a business for a specified period of time. It estimates the expected financial position of a company at the end of the period for which it was prepared. It is usually prepared to show the impact of some future changes or events.

Here are the calculations for the pro forma income statement:

Sales revenue = $571,000 Variable costs = 36% of sales revenue = 0.36 × $571,000 = $205,560

Fixed costs = $132,500

Depreciation = $51,750

Tax rate = 22%

Now, calculating the Pro forma income statement:

Sales revenue: $571,000 Less variable costs: $205,560 Contribution margin: $365,440Less

fixed costs: $132,500 Less

depreciation: $51,750 EBT: $181,190Less

Taxes (22%): $39,862

Therefore, the projected net income is $141,328.