International Finance and Accounting Handbook

Cacau do Brasil’s pro forma income statement for the first year of operations is
shown as column 1 of Exhibit 4A.2. The remainder of Exhibit 4A.2 shows expected
income accounts over the following five years in accordance with the expectations
and guidelines described above.

APPENDIX A 4 • 13

CACAU DO BRASIL, S.A.

Revenue, Expenses, and Profit for Years 1 Through 5

(In Thousands of Brazilian Reals, Except for Unit Costs)

Year Year Year Year Year

12345

Revenue

1. Unit volume (g = 3%) 25,000 25,750 26,522 27,318 28,138


2. Unit price (g = 4%) ———–5,000 ———–5,200 ———–5,408 ———–5,624 ———–5,849


3. Total sales revenue 125,000———– 133,900———– 143,431———– 153,636———– 164,579———–

Unit variable costs

4. Local labor (g = 5%) 2,000 2,100 2,205 2,315 2,431


5. Local material (g = 2%) 200 204 208 212 216


6. U.S. parent (note 1) ———1,028 ———1,068 ———1,113 ———–1,156 ———–1,203


7. Variable cost/unit ———3,228 ———3,372 ———3,526 ———–3,683 ———–3,850


8. Total variable costs ———80,700 86,829——— 93,517——— 100,612———– 108,331———–

Cost and Profit Data

9. Gross profit (3–8) 44,300 47,071 49,914 53,024 56,248


10. Royalties (5% × Sales) 6,250 6,695 7,172 7,682 8,229


11. Administration (g = 4%) 20,000 20,800 21,632 22,497 23,397


12. Depreciation 7,500 7,500 7,500 7,500 7,500
    ——— ——— ——— ———– ———–


13. Earnings before
    interest and
    taxes (EBIT) 10,550 12,076 13,610 15,375 17,122


14. Interest expense 1,200 983 755 515 262
    ——— ——— ——— ———– ———–


15. Pretax income 9,350 11,093 12,855 14,860 16,860


16. 40% Brazilian tax ———–3,740 –4,437——— –5,142——— ———––5,944 ———––6,744


17. Net income ———5,610 ———6,656 ———7,713 ———–8,916 ———–10,116
    ——— ——— ——— ———– ———–


18. Cash dividends @75% 4,207 4,992 5,785 6,687 7,587

Note 1:U.S. raw material supplied will rise in dollar price at 2% per annum with U.S. infla-
tion. The real equivalent on a per unit basis is calculated as follows. The sixth-year calcula-
tion is necessary for forecasting fifth year inventory.

Year Year Year Year Year Year

123456

Unit sales price
in $ (g = 2%) $360 $367 $375 $382 $390 $397
Exchange rate 2.8549 2.9109 2.9680 3.0262 3.0855 3.1460
——–– ——— ——— ———– ——— ———
Unit cost
in reals 1,028 1,068 1,113 1,156 1,203 1,249

Exhibit 4A.2. Revenue, Expense, and Profit Report: Five Years.