# Construct a pro forma income statement for the first year and second year

Question # 00003222 Posted By: expert-mustang Updated on: 11/07/2013 08:25 AM Due on: 11/07/2013
Subject Accounting Topic Accounting Tutorials:
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: 110,000

Price per Unit: \$11

Variable cost per unit: 30%

Fixed Costs: \$125,000

Income taxes: 15%

Interest Expense: \$200,000

In year 2, Price per unit increases to \$11.50, and unit of sales increases by 5%, all other assumptions remain the same.

2. Calculate a table of interest rates for 5 years based on the following information:

The pure interest rate is 2%

Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%

The default risk is .1% for year one and increases by .1% 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 .3% for years 3-5

3. Calculate the sustainable growth based on the following information:

* earning after taxes = \$35,000
* equity = \$100,000
* d=22.4%

4. Future value of single sum problem

You put \$2,000 in an investment account today which will earn 8% over the next 14 years, what is the future value?

5. Future value of annuity problem

You deposit \$10,000 into a retirement account at the end of the next 10 years earning 9% interest, what is the future value of your retirement after 10 years?
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1. ## Solution: Pro forma income statement

Tutorial # 00003006 Posted By: expert-mustang Posted on: 11/07/2013 08:29 AM
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2. ## Solution: Pro forma income statement

Tutorial # 00003007 Posted By: expert-mustang Posted on: 11/07/2013 08:31 AM
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The solution of Pro forma income statement...
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