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Angela Green, an investment manager at Horizon Investments, intends to hire a new investment analyst. After conducting initial interviews, Green has narrowed the pool to three candidates. She plans to conduct second interviews to further assess the candidates knowledge of industry and company analysis.

Prior to the second interviews, Green asks the candidates to analyze Chrome Network Systems, a company that manufactures internet networking products. Each candidate is provided Chromes financial information, presented in Exhibit 1

Exhibit 1 Chrome Network Systems Selected Financial Information ($ millions)

	2010	2011	2012
Net sales	46.8	50.5	53.9
Cost of sales	18.2	18.4	18.8
Gross profit	28.6	32.1	35.1
Selling, general, and administrative (SG&A) expenses	19.3	22.5	25.1
Operating income	9.3	9.6	10.0
Interest expense	0.5	0.7	0.6
Income before provision for income tax	8.8	8.9	9.4
Provision for income taxes	2.8	2.8	3.1
Net income	6.0	6.1	6.3

Green asks each candidate to forecast the 2013 income statement for Chrome and to outline the key assumptions used in their analysis. The job candidates are told to include Horizons economic outlook for 2013 in their analysis, which assumes nominal GDP growth of 3.6%, based on expectations of real GDP growth of 1.6% and inflation of 2.0%.

Green receives the models from each of the candidates and schedules second interviews. To prepare for the interviews, Green compiles a summary of the candidates key assumptions in Exhibit 2.

Exhibit 2 Summary of Key Assumptions Used in Candidates Models

Metric	Candidate A	Candidate B	Candidate C
Net sales	Net sales will grow at the average annual growth rate in net sales over the 20102012 time period.	Industry sales will grow at the same rate as nominal GDP, but Chrome will have a 2 percentage points decline in market share.	Net sales will grow 50 basis points slower than nominal GDP.
Cost of sales	2013 gross margin will be the same as the average annual gross margin over the 20102012 time period.	2013 gross margin will decline as costs increase by expected inflation.	2013 gross margin will increase by 20 basis points from 2012.
SG&A expenses	2013 SG&A/net sales ratio will be the same as the average ratio over the 20102012 time period.	2013 SG&A will grow at the rate of inflation.	2013 SG&A/net sales ratio will be the same as the 2012 ratio.
Interest expense	2013 interest expense assumes the effective interest rate will be the same as the 2012 rate.	2013 interest expense will be the same as the 2012 interest expense.	2013 interest expense will be the same as the aver-age expense over the 20102012 time period.
Income taxes	2013 effective tax rate will be the same as the 2012 rate.	2013 effective tax rate will equal the blended statutory rate of 30%.	2013 effective tax rate will be the same as the aver-age effective tax rate over the 20102012 time period.

6.What is Candidate C's forecast for 2013 Net Sales?(Round your answer to one decimal place, like this: 89.1)

7. What is Candidate C's forecast for 2013 Cost of Sales?(Round your answer to one decimal place, like this: 89.1)

8.What is Candidate C's forecast for 2013 Gross Profit?(Round your answer to one decimal place, like this: 89.1)

9.What is Candidate C's forecast for 2013 Selling, General & Administrative (SG&A) Expenses?(Round your answer to one decimal place, like this: 89.1)

10.What is Candidate C's forecast for 2013 Operating Income?(Round your answer to one decimal place, like this: 89.1)

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