FIN 375 Operating Leverage and Forecasting

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You manufacture hunting pack systems in China for 80 dollars each, including shipping. The manufacturing costs only include variable costs. You sell these packs to retailers for 200 dollars each. In the current year you will sell 100,000 packs. Your fixed costs including such items as insurance, marketing, travel, shows, office supplies, warehouse rentals etc. totals 5 million dollars this year. The federal income tax rate for your company is 40 percent. 1)Create a two-year forecast of the income statement from the information provided in problem number one. Please create three columns of data: current year, year 2, and year 3. Assume that sales increase ten percent per year for year’s two and three. Please show the earnings per share for each of the three years 2)estimate the stock price for year’s two and three, assuming that the current PE multiple remains constant for each of the two forecasted years

    • 8 years ago
    FIN 375 Operating Leverage and Forecasting
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