Assume all depreciation and amortization (D&A) and stock based compensation (SBC) expenses are allocated to the expense categories most directly associated with the nature of the D&A and SBC.

$40 million in signing bonuses to marketing and sales employees that will not begin working until the first quarter next year. $12 million in stock based compensation expense for supervisors and employees working at the manufacturing facility where the computer hardware is assembled. $9 million in depreciation of the facility where the computer hardware is assembled. $34 million in stock based compensation for existing management. 2 million computers sold to and delivered customers at $300 each. Upon sale, RRM has no further obligation to the customer. $100 million in gift card sales, $40 million of which were redeemed by the end of 2016. $20 million cash payment for last years Q4 lease payment for RRMs corporate headquarters. $4 million, paid in cash at the beginning of the year to purchase a customer list to be used for marketing the companys products. The customer list is expected to provide marketing benefits for the next 4 years. Inventory of $100 million at beginning of 2016, $20 million at end of 2016. Purchased $80 million in inventory from suppliers in 2016. RRM still owed $50 million to those suppliers at year end. $20 million increase in market value of public company shares held by RRM as investments accounted for as a trading securities. $4 million in dividends received by RRM from investments accounted for under the equity method. RRM's proportionate share of the income generated by the investment was $5 million during the period. Tax rate is 40%. Shares at the beginning of the year were 100m. The company repurchased 5m shares at $5 per share in the middle of 2016.

1) Calculate the impact to RRMs 2016 revenue from the activities

$560m

$600m

$640m

$660m

$700m

2) Calculate the impact of the activities described in the PDF document on RRMs 2016 cost of sales:

$181 million

$172 million

$160 million

$139 million

$131 million

3) Calculate the impact to RRMs 2016 operating expenses, excluding cost of sales, from the activities described in the PDF document.

$94 million

$95 million

$74 million

$75 million

$35 million

4) Calculate the impact to RRMs 2016 EBITDA from the activities described in the PDF document. EBITDA is defined as earnings before interest, tax, depreciation and amortization. For the purposes of this exercise EBITDA includes the impact of stock based compensation expense (i.e. do not add back SBC).

$434 million

$433 million

$414 million

$394 million

$374 million

5) Calculate the impact to RRMs 2016 net income from the activities described in the PDF document.

267.0 million

254.4 million

269.4 million

195.6 million

201.6 million