Question #13
Reading: Reading 14 Financial Statement Modeling
PDF File: Reading 14 Financial Statement Modeling.pdf
Page: 8
Status: Unattempted
Question
Jared Mush is preparing a report on the Everystate corporation. The information below pertains to the year ending 31 December 2015 and 2016. Dec. 31, 2016 Dec. 31, 2015 Property-Liability 32,567 31,309 Everystate Financial 3,928 4,309 Corporate and Other 39 35 Consolidated revenues $ 36,534 $ 35,618 Mush's growth forecast for 2017 is 3% for property/liability, 0% for financial and 2% for corporate and other. Also, Mush estimates that EBIT margins for the three divisions are 17%, 18% and 23% respectively. Forecasted 2017 EBIT is closest to:
Answer Choices:
A. $5,700
B. $6,400
C. $6,200
Explanation
Dec. 31,
2016
2017
Forecast
2017 EBIT
Property-Liability
32,567
33,544
5,702.48
Everystate Financial
3,928
3,928
707.04
Corporate and Other
39
40
9.15
Consolidated revenues
$ 36,534
$ 37,512
$ 6,419
Forecast revenue for Property-liability = 1.03 × 32,567 = $33,544
Forecast EBIT for property-liability = 0.17 × 33,544 = 5,702.48