6. (10 points) Imagine that you are at the end of 2017 and doing some planning for Whole Foods (See Appendix A). You have been disappointed in your 2017 performance and want to do better for 2018. Specifically, you want net income for 2018 to be 505M (similar to what it was in 2015 and 2016). Assume the following for 2018: Variable costs will be 66% of sales, Selling General & Administrative expenses and Depreciation will be the same as 2017, interest expenses will decline by 40M and your tax rate will be 38%. What level of sales will be necessary to reach the net income goal? Appendix A Financial Statements for Whole Foods INCOME STATEMENT (In US$ millions) Revenue (aka Sales) - Cost of Revenue (aka COGS) Gross Margin - Selling, General and Administrative - Depreciation Operating Income - Interest Expense Income Before Taxes - Income Taxes Net Income 2017 16,030 10,633 5,397 4,627 155 615 198 417 172 245 2016 15,724 10,313 5,411 4,477 77 857 30 827 320 507 2015 15,389 9,973 5,416 4,472 83 861 2014 14,194 9,150 5,044 4,032 78 934 12 922 367 555 2013 12,917 8,288 4,629 3,682 64 883 17 11 844 342 502 872 343 529 BALANCE SHEET 2012 1,323 197 (In US$ millions) Cash and Cash Equivalents Receivables Inventories Other Current Assets Total Current Assets 2017 950 366 471 358 2,145 Balance sheets as of December 31st of each year 2016 2015 2014 2013 852 519 852 1,134 242 218 198 188 517 500 441 414 364 307 265 244 1,975 1,544 1,756 1,980 4,366 4,197 3,988 3,558 5,741 5,744 5,538 374 209 2,103 3,191 5,294 Property, Plant and Equipment Total Assets 4,531 6,676 6,341 295 247 247 307 Accounts Payable Wages Payable Notes Payable and other Short-term Debt Total Current Liabilities 371 397 587 1,355 307 407 627 1,341 436 521 1,252 276 379 602 1,257 367 474 1,088 423 977 23 Long-Term Debt Other Liabilities (no interest charge) Total Liabilities 1,771 120 3,246 1,688 88 3,117 649 71 1,972 608 66 26 546 1,660 492 1,492 1,931 Common Stock Retained Earnings Total Equity Total Liabilities and Equity 2,934 496 3,430 6,676 875 2,349 3,224 6,341 1,752 2,017 3,769 5,741 2,145 1,668 3,813 5,744 2,613 1,265 3,878 5,538 2,569 1,233 3,802 5,294