Construct a performa income statement for the first year

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Reference no: EM13216572

Question 1:

Construct a pro forma income statement for the first year and second year for the following assumptions:

•Units of Sales in Year 1: 100,000.
•Price per Unit: $10.
•Variable cost per unit: 30%.
•Fixed Costs: $120,000.
•Income taxes: 15%.
•Interest Expense: $200,000.
•In year 2, Price per unit increases to $11.50, and unit of sales increases by 3%, all other assumptions remain the same. .

Question 2:

Calculate the sustainable growth based on the following information:
• Earnings after taxes = $35,000
• Equity = $100,000
• d=22.4%
Question 7
Calculate a table of interest rates based on the following information:
•The pure interest rate is 1.6%.
•Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5%.
•The default risk is .1% for year one and increases by .2% over each year.
•Liquidity premium is 0 for year 1 and increases by .2% each year.
•Maturity risk premium is 0 for years 1 and 2 and .2% for years 3-5.

Reference no: EM13216572

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