Based on Exhibits 1 and 2, Candidate C’s forecast for cost of sales in 2013 is closest to:

A. $18.3 million.

B. $18.9 million.

C. $19.3 million.

Angela Green, an investment manager at Horizon Investments, intends to hire a new investment analyst. After conducting initial interviews, Green has narrowed the pool to three candidates.
She plans to conduct second interviews to further assess the candidates’ knowledge of industry and company analysis.

Prior to the second interviews, Green asks the candidates to analyze Chrome Network Systems, a company that manufactures internet networking products. Each candidate is provided Chrome’s financial information presented in Exhibit 1.

Green asks each candidate to forecast the 2013 income statement for Chrome and to outline the key assumptions used in their analysis. The job candidates are told to include Horizon’s economic outlook for 2013 in their analysis, which assumes nominal GDP growth of 3.6%, based on expectations of real GDP growth of 1.6% and inflation of 2.0%.

Green receives the models from each of the candidates and schedules second interviews.
To prepare for the interviews, Green compiles a summary of the candidates’ key assumptions in Exhibit 2.

Transcribed Image Text:

EXHIBIT 1 Chrome Network Systems Selected Financial Information (in millions of $) Year Ended: 2010 2011 2012 Net sales Cost of sales 46.8 50.5 53.9 18.2 18.4 18.8 Gross profit 28.6 32.1 35.1 Selling, general, and administrative (SG&A) expenses 19.3 22.5 25.1