Jaffe and Jordan want to use financial planning models to prepare a projected (pro forma) financial statement to determine the profitability and financial health of the business for next year, ending Dec 31, 2021. Use the pro forma financial statement below to answer the following questions: PRO FORMA INCOME STATEMENT ($millions) Total operating revenues 82 Less expenses 27 Less depreciation 9 Earnings before interest and taxes 46 Less interest 4 Net income before taxes 42 Less taxes @ 23.8% 10 Net income 32 PRO FORMA BALANCE SHEET Assets: Cash 19 Other current assets 28 Net Fixed Assets 40 Total Assets 87 Liabilities and Equities: Accounts payable 12 Long-term debt 28 Stockholders' Equity 47 Total Liabilities & Equities 87 a. What is the  estimated profit  of the business for 2021? b.  Compute the following  profitability ratios and explain to Jaffe and Jordan whether the business looks profitable relative to the performance of the industry. i. Profit margin  ii. Return on assets  iii. Return on equity  iv. calculate and explain operating cash flow The industry ratios are as follows: Industry ratios Profit margin 32.80% Return on assets 34.00% Return on equity 42.50% c. Assuming you project a 25% increase in  operating revenue  (sales) per year what will be the anticipated operating revenue in 2022? d. If net income is projected to increase by 20% per year, what will be the  profit margin  in 2022? e. What will be the estimated  earnings per share  (EPS) in 2022 if 1,000,000 shares are issued? .

1. Jaffe and Jordan want to use financial planning models to
prepare a projected (pro forma) financial statement to determine
the profitability and financial health of the business for next
year, ending Dec 31, 2021. Use the pro forma financial
statement below to answer the following questions:
PRO FORMA INCOME STATEMENT
($millions)
Total operating revenues
82
Less expenses
27
Less depreciation
9
Earnings before interest and taxes
46
Less interest
4
Net income before taxes
42

2. Less taxes @ 23.8%
10
Net income
32
PRO FORMA BALANCE SHEET
Assets:
Cash
19
Other current assets
28
Net Fixed Assets
40
Total Assets
87
Liabilities and Equities:
Accounts payable
12
Long-term debt

3. 28
Stockholders' Equity
47
Total Liabilities & Equities
87
a. What is the
estimated profit
of the business for 2021?
b. Compute the following
profitability ratios
and explain to Jaffe and Jordan whether the business looks
profitable relative to the performance of the industry.
i. Profit margin
ii. Return on assets
iii. Return on equity
iv. calculate and explain operating cash flow
The industry ratios are as follows:
Industry ratios
Profit margin
32.80%

4. Return on assets
34.00%
Return on equity
42.50%
c. Assuming you project a 25% increase in
operating revenue
(sales) per year what will be the anticipated operating revenue
in 2022?
d. If net income is projected to increase by 20% per year, what
will be the
profit margin
in 2022?
e. What will be the estimated
earnings per share
(EPS) in 2022 if 1,000,000 shares are issued?