3.3.2. Forecast Income Statement

The forecast income statement is employed to quantify an exercise's profit or loss and to discover how it was created. This is done by carrying out an analysis of each item of expenditure with regard to incomes. It is possible to classify the expenses and incomes of this type of projects in the following manner: (i) the *annual sales (AS)*, i.e., the incomes attained after operating the project; (ii) the *operational expenditures (OPEX)*, including operation and maintenance costs, administrative costs, taxes, rent, insurance, etc.; (iii) the *amortization (AM)* during the period as regards plant and equipment, the attrition of property and intangible assets; (iv) the *financing expenses (FE)*, including the project's incomes and financial expenses, and (v) the *corporate taxes (T)*, in which the taxes on the benefits of the period that are different from the other taxes paid by the corporation (and which are normally viewed as structural expenses) are considered. All these expenses are used to organize the forecast income statement in the following manner:

$$EBIT = AS - OPEX - AM\_\prime$$

$$EBT = EBIT - FE\_\prime \\ \tag{3}$$

$$NI = EBT - T\_\prime$$

where *EBT* represents earnings before taxes, *NI* denotes the net income, *EBIT* symbolizes earnings before interest and taxes and *CFp* = *N I* + *AM* is the cash-flows of the project.
