Question
Pro forma Income Statement & Balance Sheet for Radial Inc. This experiential exercise involves creating a pro forma Balance Sheet and a pro forma Income
Pro forma Income Statement & Balance Sheet for Radial Inc.
This experiential exercise involves creating a pro forma Balance Sheet and a pro forma Income Statement for Radial Inc. Assume the current year is 2015. To assist you in this endeavor, an Excel worksheet containing Radial's 2014 Income Statement and Balance Sheet has been provided. Develop the two pro forma financial statements for 2015 based upon the following assumptions: The company plans to increase sales by an additional 2 percent in 2015 due to minor price increases. In addition, the firm plans to launch a massive marketing campaign in Europe. The campaign is anticipated to cost $100,000,000 and to add an additional $500,000,000 in sales during 2015. The company plans to invest an additional $400,000,000 in additional research and development in 2015. New plant and equipment is projected to cost $500,000,000, and will be depreciated over 20 years. (Note: Assume the plant and equipment come on line the first day of 2013). Salaries for new employees are estimated at $50,000,000 for 2013. The company plans to finance construction of the new facilities by taking on $500,000,000 in long-term debt. The terms of the transaction include a 10-year balloon loan at 5 percent interest. Interest payments are due on December 31 for each of the next ten years. The company anticipates issuing 100,000,000 new shares of common stock. The firm currently has 296,330,000 outstanding shares of common stock. The new shares are expected to sell for $350 per share. The new offering is expected to occur on January 1, 2015. Show how each answer is calculated.
Radial Inc. Pro Forma Income Statement | 12/31/2014 | 12/31/2015 |
(Values in Thousands) | ||
Total Revenue | 6,138,560 | |
Cost of Revenue, Total | 2,577,088 | |
Gross Profit | 3,561,472 | |
Operating Expenses | ||
Selling, General and Administrative Expenses | 854,684 | |
Research & Development | 599,510 | |
Depreciation/Amortization | 0 | |
Non Recurring | 90,000 | |
Total Operating Expenses | 1,544,194 | |
Operating Income or Loss | 2,017,278 | |
Income from Continuing Operations | ||
Total Other Income/Expenses Net | 125,175 | |
Earnings Before Interest and Taxes | 2,142,453 | |
Interest Expense | 776 | |
Income Before Tax | 2,141,677 | |
Income Tax Expense | 676,280 | |
Net Income from Continuing Operations | 1,465,397 | |
Net Income | 1,465,397 | |
Preferred Stock and Other Adjustments | 0 | |
Net Income Applicable To Common Shares | 1,465,397 |
Radial Inc. Pro Forma Balance Sheet | 12/31/2014 | 12/31/2015 |
(Values in Thousands) | ||
Assets | ||
Current Assets | ||
Cash and Equivalents | 4,173,211 | |
Short Term Investments | 4,157,073 | |
Net Receivables | 737,317 | |
Inventory | 0 | |
Other Current Assets | 229,507 | |
Total Current Assets | 9,297,108 | |
Long Term Investments | ||
Property, Plant and Equipment, Gross | 961,749 | |
Goodwill | 194,900 | |
Intangible Assets | 82,783 | |
Less: Accumulated Depreciation | 0 | |
Other Assets | 31,310 | |
Total Non-Current Assets | 1,270,742 | |
Total Assets | 10,567,850 | |
Liabilities and Shareholders' Equity | ||
Current Liabilities | ||
Accounts Payable | 672,285 | |
Short/Current Long Term Debt | 0 | |
Other Current Liabilities* | 73,099 | |
Total Current Liabilities | 745,384 | |
Non-Current Liabilities | ||
Long Term Debt | 0 | |
Deferred Income Taxes* | 61,585 | |
Deferred Long Term Liability Charges | 45,887 | |
Minority Interest* | 0 | |
Total Non-Current Liabilities | 107,472 | |
Total Liabilities | 852,856 | |
Shareholders' Equity | ||
Preferred Stock Equity* | 0 | |
Common Stock Equity | 296,330 | |
Retained Earnings | 2,055,868 | |
Capital Surplus | 7,477,792 | |
Other Stockholder Equity | -114,996 | |
Total Stockholders' Equity | 9,714,994 | |
Total Liabilities/Stockholders Equity | 10,567,850 |
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