CASE STUDY: PERFORMANCE LAWN EQUIPMENT Pro Forma Income Statement

Part $1$: The Performance Lawn Equipment Database contains data needed to develop a pro forma income statement. Dealers selling PLE products all receive

$18\%$ of sales revenue for their part of doing business, and this is accounted for as the selling expense. The tax rate is $50\%.$ Develop an Excel worksheet to

extract and summarize the data needed to develop the income statement for $2018$ and implement an Excel model in the form of a pro forma income statement for

the company.

Part $2$: The CFO of Performance Lawn Equipment, J$.$ Kenneth Valentine, would like to have a model to predict the net income for the next three years. To do this,

you need to determine how the variables in the pro forma income statement will likely change in the future. Using the calculations and worksheet that you

developed along with other historical data in the database, estimate the annual rate of change in sales revenue, cost of goods sold, operating expense, and

inter$-$est expense. Use these rates to modify the pro forma income statement to predict the net income over the next three years. Because the estimates you

derived from the historical data may not hold in the future, conduct appropriate what$-$if and scenario analyses to investigate how the projections might change if

these assumptions don't hold. Summarize your results and conclusions in a report to Mr$.$ Valentine.