Question

Your pro forma income statement shows sales of $ 965 comma 000​, cost of goods sold as $ 492 comma 000​, depreciation expense of $ 96 comma 000​, and taxes of $ 94 comma 250 due to a tax rate of 25 %. What are your pro forma​ earnings? What is your pro forma free cash​ flow?

Answer 1

Answer and Explanation:

The computation is shown below:

For Proforma earnings

Sales $965,000

Less: Cost of Goods sold $492,000

Gross Profit $473,000

Less: Depreciation expense  $96,000

EBIT $377,000

Less: Taxes $94,250

Proforma Earnings $282,750

Now the proforma free cash flow is

= Proforma Earnings+ depreciation expense

= $282,750 + $96,000

= $378,750

We simply applied the above format and equation to determine each of the item