Under the assumption that Ideko's market share will increase by 0.5 percent per year, you project the following investment and depreciation.

2005 2006 2007 2008 2009 2010

New investment 5,000 5,000 5,000 5,000 5,000 20,000

Depreciation (5,500) (5,450) (5,405) (5,365) (5,328) (6,795)

Using this information here, project net income through 2019 (this is, reproduce table 19.7 under the new assumptions). Assume, the corporate tax is 35%. Ideko's income statement for 2005 is shown.

To build the pro forma income statement, we begin with Idekop's sales. (Round the the nearest $000.)

*Please explain how to solve the answer

(Click on the following icon 9 in order to copy its contents into a spreadsheet.) Estimated 2005 Income Statement Data for Ideko Corporation Income Statement ($ 000) Sales 75,000 Cost of Goods Sold Raw Materials (16,000) Direct Labor Costs (18,000) Gross Profit 41,000 Sales and Marketing (11,250) Administrative (13,500) EBITDA 16,250 Depreciation (5,500) EBIT 10,750 Interest Expense (net) (75) Pretax Income 10,675 Income Tax (3,736.25) Net Income 6,938.75 (Click on the following icon in order to copy its contents into a spreadsheet.) Growth 2005 Year 2008 2006 2007 2009 2010 5% 0.5% 10,000 10.00% 75.0000 10,500 10.50% 76.5000 11,025 11.00% 78.0300 11,576.25 11.50% 79.5906 12,155.06 12.00% 81.1824 12,762.81 12.50% 82.8061 2% Sales Data Market Size (000 units) Market Share Average Sales Price ($/unit) Cost of Goods Data Raw Materials ($/unit) Direct Labor Costs (S/unit) Operating Expense Data Sales and Marketing (% sales) Administrative (% sales) Interest on Term Loan ($ 000) 1% 4% 16.0000 18.0000 16.1600 18.7200 16.3216 19.4688 16.4848 20.2476 16.6497 21.0575 16.8162 21.8998 15.0 16.5 18.0 19.5 20.0 20.0 18 (75) 15 (6,800) 15 (6,800) 14 (6,800) 13 (6,800) 13 (6,800) TABLE 19.7 SPREADSHEET Pro Forma Income Statement for ldeko, 2005-2010 Year 2005 2006 2007 2008 2009 2010 75,000 88,358 103,234 119,777 138, 149 158,526 Income Statement ($ 000) 1 Sales 2 Cost of Goods Sold 3 Raw Materials 4 Direct Labor Costs 5 Gross Profit 6 Sales and Marketing 7 Administrative 8 EBITDA 9 Depreciation 10 EBIT 11 Interest Expense (net) 12 Pretax Income 13 Income Tax 14 Net Income (16,000) (18,665) (21,593) (24,808) (28,333) (32,193) (18,000) (21,622) (25,757) (30,471) (35,834) (41,925) 41,000 48,071 55,883 64,498 73,982 84,407 (11,250) (14,579) (18,582) (23,356) (27,630) (31,705) (13,500) (13,254) (15,485) (16,769) (17.959) (20,608) 16,250 20,238 21,816 24,373 28,393 32,094 (5,500) (5,450) (5,405) (6,865) (7,678) 17,710) 10,750 14,788 16,411 17,508 20,715 24,383 (75) (6.800) 16,800) (6,800) (7,820) (8,160) 10,675 7,988 9.611 10,708 12,895 16,223 (3,736) (2,796) (3,364) (3,748) (4,513) (5,678) 6,939 5,193 6,247 6,960 8,382 10,545 Under the assumption that Ideko's market share will increase by 0.5 percent per year, you project the following investment and depreciation: (Click on the following icon o in order to copy its contents into a spreadsheet.) Fixed Assets and Capital Investment ($ 000) 2007 New Investment Depreciation 2005 5,000 (5,500) 2006 5,000 (5,450) 5,000 (5,405) 2008 5.000 (5,365) 2009 5.000 (5,328) 2010 20,000 (6,795) Using this information and the information here : (IMPORTANT: Please click on the icon to import the table into a spreadsheet and use all the values as rounded on the spreadsheet. DO NOT recalculate the forecasted values.), project net income through 2010 (that is, reproduce Table 19.7 under the new assumptions). Assume the corporate tax rate is 35%. Ideko's income statement for 2005 is shown here : To build the pro forma income statement, we begin with Ideko's sales. (Round to the nearest $ 000.) Income Statement ($ 000) 2005 2006 2007 2008 2009 2010 Sales 75,000 (Click on the following icon 9 in order to copy its contents into a spreadsheet.) Estimated 2005 Income Statement Data for Ideko Corporation Income Statement ($ 000) Sales 75,000 Cost of Goods Sold Raw Materials (16,000) Direct Labor Costs (18,000) Gross Profit 41,000 Sales and Marketing (11,250) Administrative (13,500) EBITDA 16,250 Depreciation (5,500) EBIT 10,750 Interest Expense (net) (75) Pretax Income 10,675 Income Tax (3,736.25) Net Income 6,938.75 (Click on the following icon in order to copy its contents into a spreadsheet.) Growth 2005 Year 2008 2006 2007 2009 2010 5% 0.5% 10,000 10.00% 75.0000 10,500 10.50% 76.5000 11,025 11.00% 78.0300 11,576.25 11.50% 79.5906 12,155.06 12.00% 81.1824 12,762.81 12.50% 82.8061 2% Sales Data Market Size (000 units) Market Share Average Sales Price ($/unit) Cost of Goods Data Raw Materials ($/unit) Direct Labor Costs (S/unit) Operating Expense Data Sales and Marketing (% sales) Administrative (% sales) Interest on Term Loan ($ 000) 1% 4% 16.0000 18.0000 16.1600 18.7200 16.3216 19.4688 16.4848 20.2476 16.6497 21.0575 16.8162 21.8998 15.0 16.5 18.0 19.5 20.0 20.0 18 (75) 15 (6,800) 15 (6,800) 14 (6,800) 13 (6,800) 13 (6,800) TABLE 19.7 SPREADSHEET Pro Forma Income Statement for ldeko, 2005-2010 Year 2005 2006 2007 2008 2009 2010 75,000 88,358 103,234 119,777 138, 149 158,526 Income Statement ($ 000) 1 Sales 2 Cost of Goods Sold 3 Raw Materials 4 Direct Labor Costs 5 Gross Profit 6 Sales and Marketing 7 Administrative 8 EBITDA 9 Depreciation 10 EBIT 11 Interest Expense (net) 12 Pretax Income 13 Income Tax 14 Net Income (16,000) (18,665) (21,593) (24,808) (28,333) (32,193) (18,000) (21,622) (25,757) (30,471) (35,834) (41,925) 41,000 48,071 55,883 64,498 73,982 84,407 (11,250) (14,579) (18,582) (23,356) (27,630) (31,705) (13,500) (13,254) (15,485) (16,769) (17.959) (20,608) 16,250 20,238 21,816 24,373 28,393 32,094 (5,500) (5,450) (5,405) (6,865) (7,678) 17,710) 10,750 14,788 16,411 17,508 20,715 24,383 (75) (6.800) 16,800) (6,800) (7,820) (8,160) 10,675 7,988 9.611 10,708 12,895 16,223 (3,736) (2,796) (3,364) (3,748) (4,513) (5,678) 6,939 5,193 6,247 6,960 8,382 10,545 Under the assumption that Ideko's market share will increase by 0.5 percent per year, you project the following investment and depreciation: (Click on the following icon o in order to copy its contents into a spreadsheet.) Fixed Assets and Capital Investment ($ 000) 2007 New Investment Depreciation 2005 5,000 (5,500) 2006 5,000 (5,450) 5,000 (5,405) 2008 5.000 (5,365) 2009 5.000 (5,328) 2010 20,000 (6,795) Using this information and the information here : (IMPORTANT: Please click on the icon to import the table into a spreadsheet and use all the values as rounded on the spreadsheet. DO NOT recalculate the forecasted values.), project net income through 2010 (that is, reproduce Table 19.7 under the new assumptions). Assume the corporate tax rate is 35%. Ideko's income statement for 2005 is shown here : To build the pro forma income statement, we begin with Ideko's sales. (Round to the nearest $ 000.) Income Statement ($ 000) 2005 2006 2007 2008 2009 2010 Sales 75,000