Based on the information below, build a proforma income statement with: Revenue, Variable costs, Fixed cost, Depreciation, Taxes and Net income.

Asteroid Pictures is a movie studio that was founded in 1948 in Hollywood, California by Maxwell Roid. Over the past fifty years the company has been quite successful. It has produced over 200 movies and has grown into a Fortune 500 company. Its trademark, a giant rock flying through space towards the earth at supersonic speeds, is recognized worldwide and its slogan its the end of the world as you know it!- is second only to got milk? in popularity among consumers. Earlier this month, after over 68 years in the movie business, Maxwell Roid decided to step down from the helm of the company and he handed the control of the studio over to his grandson, Max (Rock) Roid III. Rock is a recent graduate with a business degree from a topnotch university but has little experience in the movie business. As the head of the movie studio, Rocks primary responsibility will be to determine which pictures the studio should produce. Despite his lack of experience, Rock is confident that the skills he learned in his finance classes would enable him to successfully manage this multi-billion-dollar business. On his first day as the new studio president, Rock is asked to decide if the studio should go forward with its plans to produce a new movie. The movie, entitled Zizanic, is a fictional drama about two young lovers aboard a famous zeppelin that crashed. Given the recent popularity of drama meets disaster films, the industry buzz is that the movie has great promise. Rock has a sinking feeling in his stomach. He realizes that he has a decision to make. By the end of the day he has to determine if the studio should go forward and make the movie. Otherwise, the writers can take the script to another studio. Assume that once Rock tells the writers he will make the movie, he cannot back out of his decision. In other words, he cannot buy the script and then not make the movie or pass on the script and then change his mind to make the movie. Rock is given a thick file folder full of information about the Zizanic project to review carefully. The Asteroid Files The studio has already invested $1.75 million into the movie by purchasing the right to buy the script and bringing in actors and actresses to audition for the parts. If Asteroid buys the script they would have to pay the script writers an additional $3.25 million when they start shooting the movie. The movie would be shot on location in four different countries and production costs are expected to be $60 million, all of which would be required to be paid by the company when shooting for the movie began. Production costs include paying the director and the cast (the star, Dino Dicapria, alone would get $5 million), travel and lodging costs expenses, and any fees as- sociated with the use of the property where they would be shooting. Also included in the $60 million in production costs is $3.7 million for the crew (e.g., make-up people, grips, carpenters) who are currently under contract with the studio and will get paid money regardless if Asteroid decides to make this picture or not. Not included in the production costs are the costumes used in the movie. These costumes originally cost $600,000 and were purchased for a previous movie Asteroid made several years ago. Asteroid has already agreed to sell these costumes to a wax museum in Florida for $400,000. They plan to invest the funds from the sale of these costumes in a project with relatively the same level of risk as the Zizanic movie. If they make the movie they will have to postpone the sale of the costumes for one year. The studios marketing people are estimating the movie would gross $57 million in the first year of release. In the following year, when Zizanic is released on video, they expect to sell 700,000 videotapes. In the third year, video sales are projected to be 350,000 videotapes. After year three, revenues from the movie should be close to 0. These videotapes would be sold for $19 each and the cost to making the videotape would be $5 each. The company will require $120,000 worth of videos in inventory beginning 1 year from today. The Internal Revenue Service will allow Asteroid to depreciate the cost of the script and incremental production costs. The company plans on depreciating these costs to zero over three years using the straight line method of depreciation. Also, the company expects to sell items from the production of the movie for $1,500,000 in year three and consider this to be the salvage value from the project. The company also expects that once the movie is released, the video sales of the other movies they have made previously starring Dino Dicapria should also increase. If the studio does not make Zizanic, these other videos have annual net profits of $2 million a year and would remain at that level forever. If they do make the Zizanic, in the first three years following the release of Zizanic the net profits from these other videos are predicted to increase to $4.5 million. After year three, net profits of the videos for other movies would return to $2 million a year. Mr. Dicapria has made three movies for another studio, not associated with Asteroid and the video sales of these movies are also expected to increase by $800,000 per year for three years following the release of the Zizanic. The studio has a 40% tax rate and an 12% cost of capital.