Lumin Telecomm produces specialized telecommunication equipment and has made losses each year over the three years it...

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Lumin Telecomm produces specialized telecommunication equipmentand has
made losses each year over the three years it has been inexistence—it has an ac-
cumulated net operating loss of $180 million. In the most recentyear, the firm
reported an operating loss of $90 million on revenues of $1billion. If you expect
the growth rate in revenues to be 20% a year for the next fiveyears, and the pre-
tax operating margin to be
?
6% next year,
?
3% two years from now, 0% the
year after, 6% in four years, and 10% in five years (taxrate
=
40%), estimate:
a. The revenues and pretax operating income each year for thenext five years.
b. The taxes you would have to pay and your after-tax operatingincome each
year for the next five years.

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Transcribed Image Text

Lumin Telecomm produces specialized telecommunication equipmentand hasmade losses each year over the three years it has been inexistence—it has an ac-cumulated net operating loss of $180 million. In the most recentyear, the firmreported an operating loss of $90 million on revenues of $1billion. If you expectthe growth rate in revenues to be 20% a year for the next fiveyears, and the pre-tax operating margin to be?6% next year,?3% two years from now, 0% theyear after, 6% in four years, and 10% in five years (taxrate=40%), estimate:a. The revenues and pretax operating income each year for thenext five years.b. The taxes you would have to pay and your after-tax operatingincome eachyear for the next five years.