Now consider the project that ABC company is considering in problem 3, is expected to have sales of 2 million units per year for the four-year life of the project. The expect to sell each unit at a price of $70. Cost of goods sold are expected to be 80% of sales revenue and sales and general administrative expenses are expected to be 10% of sales revenue. The company will also have interest expense of $2.5 million per year. Construct a proforma income statement to compute the net income and operating cash flows for ABC Companys project.

Depreciation = Cost of equipment/Life of equipment = $30,000,000/5 = $6,000,000

Book value = Cost of equipment/beginning balance - Depreciation

after-tax salvage value = salvage value - tax on salvage value

tax on salvage value = (salvage value - book value at the end of year 4)*tax rate

salvage value is 20% of equipment's cost in year 4 which is $30,000,000*20% = $6,000,000

Tax on salvage value = ($6,000,000 - $6,000,000)*21% = $0*21% = $0

After-tax salvage value = $6,000,000 - $0 = $6,000,000

The after-tax salvage value in year 4 is $6,000,000.

HELP MAKING PROFORMA SHEET PLEASE DO IT in word .

4. Now consider the project that ABC company is considering in problem 3, is expected to have sales of 2 million units per year for the four-year life of the project. The expect to sell each unit at a price of $70. Cost of goods sold are expected to be 80% of sales revenue and sales and general administrative expenses are expected to be 10% of sales revenue. The company will also have interest expense of $2.5 million per year. Construct a proforma income statement to compute the net income and operating cash flows for ABC Companys project.