Question
Develop pro forma income st atements for the next 5 years using the Revenue data from exhibit 3 & 4. Exhibit 2 Income Statements (USD
Develop pro forma income statements for the next 5 years using the Revenue data from exhibit 3 & 4.
| Exhibit 2 | |||||
| Income Statements | |||||
| (USD in millions) | 2011 | 2012 | 2013 | 2014 | 2015 |
| Revenue | $ 43,218.00 | $ 46,061.00 | $ 48,607.00 | $ 47,142.00 | $ 49,161.00 |
| Cost of revenue | $ (16,682.00) | $ (17,852.00) | $ (19,167.00) | $ (19,373.00) | $ (19,480.00) |
| Gross profit | $ 26,536.00 | $ 28,209.00 | $ 29,440.00 | $ 27,769.00 | $ 29,681.00 |
| Research and development | $ (5,823.00) | $ (5,488.00) | $ (5,942.00) | $ (6,294.00) | $ (6,207.00) |
| Sales, general and administrative | $ (11,720.00) | $ (11,969.00) | $ (11,802.00) | $ (11,437.00) | $ (11,861.00) |
| Restructuring, merger and acquisition | $ (799.00) | $ (304.00) | $ (105.00) | $ (418.00) | $ (484.00) |
| Operating income | $ 8,194.00 | $ 10,448.00 | $ 11,591.00 | $ 9,620.00 | $ 11,129.00 |
| Interest expense | $ (628.00) | $ (596.00) | $ (583.00) | $ (564.00) | $ (566.00) |
| Income before taxes | $ 7,566.00 | $ 9,852.00 | $ 11,008.00 | $ 9,056.00 | $ 10,563.00 |
| Provision for income taxes | $ (1,335.00) | $ (2,118.00) | $ (1,244.00) | $ (1,862.00) | $ (2,220.00) |
| Net income | $ 6,231.00 | $ 7,734.00 | $ 9,764.00 | $ 7,194.00 | $ 8,343.00 |
| Exhibit 3 | |||||
| Sales Forecast Assumption | |||||
| Exchange Rate Assumption | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
| Pound (in dollars per Pound) | $1.40 | $1.42 | $1.44 | $1.46 | $1.48 |
| Yen (in Yen per dollar) | 112.00 | 114.00 | 116.00 | 118.00 | 120.00 |
| (Units in Millions) | |||||
| Product A | |||||
| FY2016 | FY2017 | FY2018 | FY2019 | FY2020 | |
| U.K. Division (Pounds) | |||||
| Units | 510 | 528 | 546 | 565 | 585 |
| Price per Unit | 6.65 | 14.47 | 14.76 | 15.05 | 15.35 |
| Japanese Division | |||||
| Units | 400 | 404 | 408 | 412 | 416 |
| Price per Unit | 1,117.76 | 1,161.61 | 1,165.20 | 1,189.67 | 1,214.65 |
| U.S. Division (Dollar) | |||||
| Units | 620 | 639 | 658 | 677 | 698 |
| Price per Unit | $9.98 | $10.19 | $10.40 | $10.62 | $10.85 |
| (Units in Millions) | |||||
| Product B | |||||
| FY2016 | FY2017 | FY2018 | FY2019 | FY2020 | |
| U.K. Division (Pounds) | |||||
| Units | 315 | 318 | 321 | 325 | 328 |
| Price per Unit | 12.67 | 12.79 | 12.92 | 13.05 | 13.18 |
| Japanese Division | |||||
| Units | 305 | 308 | 311 | 314 | 317 |
| Price per Unit | 2,128.00 | 2,130.00 | 2,132.00 | 2,133.00 | 2,134.00 |
| U.S. Division (Dollar) | |||||
| Units | 210 | 213 | 216 | 220 | 223 |
| Price per Unit | $19.00 | $19.19 | $19.38 | $19.58 | $19.77 |
| (Units in Millions) | |||||
| Product C | |||||
| FY2016 | FY2017 | FY2018 | FY2019 | FY2020 | |
| U.K. Division (Pounds) | |||||
| Units | 140 | 146 | 151 | 157 | 164 |
| Price per Unit | 33.33 | 33.99 | 34.67 | 35.37 | 36.07 |
| Japanese Division | |||||
| Units | 95 | 98 | 102 | 105 | 109 |
| Price per Unit | 5,598.88 | 5,654.88 | 5,711.42 | 5,768.53 | 5,826.22 |
| U.S. Division (Dollar) | |||||
| Units | 205 | 215 | 226 | 237 | 249 |
| Price per Unit | $49.99 | $49.99 | $49.99 | $51.00 | $52.00 |
The products are all produced in the United States.
Please use the following data below to calculate the weighted average cost of goods sold.
Product A target: 38% (as a percent of sales)
Product B target: 41% (as a percent of sales)
Product C target: 39% (as a percent of sales)
Please assume the cost (as a percent of sales) for the following items will remain the same as year 2015:
Research and development
Sales, General and administrative
Restructuring, merger and acquisition
Please assume an average tax rate of 21%.
The Short Term debt has a cost of .5%.
The company has the following long term debt outstanding.
| Exhibit 4 | |||||
| Debt | |||||
| Currency | Maturity | Amount (USD) | Face Value (local FX) | Yield to Maturity | Coupon |
| GBP | 2/20/2020 | $1,400.00 | 1,000.00 | 2.010% | 2.010% |
| USD | 5/1/2025 | $5,000.00 | NA | 1.691% | 1.691% |
| JPY | 7/1/2026 | $4,000.00 | 448,000.00 | 1.210% | 1.210% |
| USD | 1/1/2027 | $4,057.00 | NA | 3.246% | 3.246% |
| GBP | 2/20/2028 | $7,000.00 | 5,000.00 | 3.625% | 3.625% |
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