Pro Forma Income Statements Presented below is the consolidated statement of earnings for Mann & Miller, Inc. Mann & Miller, Inc. Consolidated Statement of Earnings (5 millions) 2014 Sales of customers Cost of goods sold Gross profit Selling, marketing & administrative expense Research expense Purchased in-process research & development Interest income 2015 $34,889 $32,317 $29,172 9,296 9,581 8,957 25,593 22,736 20,215 12,216 11,260 10,495 3,957 3,591 3,105 189 105 66 2013 (256) Interest expense, net of portion capitalized Other (income) expense, net 160 294 (456) (429) 153 204 185 (94) Earnings before provision for income taxes Provision for income taxes Net earnings Basic net earnings per share Diluted net earnings per share Required 16,560 14,838 13,347 9,033 7,898 6,868 2,620 2,230 1,915 $6,413 $5,668 $4,953 $2.20 $1.87 $1.65 $2.16 $1.84 $1.61 Using the Mann & Miller Inc. (M&M) consolidated statement of earnings as your base year, prepare pro forma income statements for M&M for 2016 and 2017. Relevant assumptions that you should use include: Sales growth is 10 percent per year. Gross profit margin is 65 percent. Effective income tax rate is 29 percent. Selling, marketing & administrative expenses, research expenses, and other income and expenses net all vary as a function of sales. Purchased in-process R&D, and interest income remain constant at the 2015 level. Interest expense is six percent of the beginning balance of long-term debt. Long-term debt at the end of 2015 is $2,400 and increases by five percent each year. Instructions 1. Round answers to the nearest whole number. 2. Use rounded Sales figure for subsequent calculations. 3. For selling, marketing & administrative expenses, research expenses, and other income and expenses computations- use (2015 expense/2015 sales) as your factor for both 2016 and 2017 computations. Do not round until your final answer. 4. Use a negative sign with interest income answers. Mann & Miller, Inc. Proforma Financial Statements (in millions) 2016 2017 Sales to customers $ $ Cost of sales Gross profit Selling & administrative Research In-process R & D Interest income Interest expense Other (income) expense, net Income before taxes Income taxes Netincome $ $