Question #5
Reading: Reading 14 Financial Statement Modeling
PDF File: Reading 14 Financial Statement Modeling.pdf
Page: 3
Status: Unattempted
Question
Victor Mendoza is an equity analyst for LLT Partners, a private wealth management firm. Mendoza is currently valuing Testo Inc, a seller of smart phones. While reviewing the financials, Mendoza collects sales information of two of Testo's popular models as indicated below (figures in $ millions): Year 20x1 20X2 20X3 Alpinex 88.9 92.3 97.5 Bemax 0 54 433 Mendoza believes that in 20X4 the combined growth rate of Alpinex and Bemax will slow to 30%. Mendoza also believes that Bemax's share of revenue will grow to 90%. The estimated level of sales for Bemax based on Mendoza's assumptions is closest to:
Answer Choices:
A. $563 million
B. $621 million
C. $507 million
Explanation
Combined sales for 20X3 = (97.5 + 433) × (1.30) = $690
Bemax's share = 0.90 × 690 = $620.69