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Chapter 6 • Analysis Tool #3: Establishing Target Prices 85(3) Compute Net IncomeNet income is sales multiplied by profit margin. I’ve forecastedAlpharma’s 2004 sales and profit margin, so multiplying the two figuresgives Alpharma’s estimated net income for 2004.Net Income = Sales x Profit Margin2004 Net Income—$1,400 million x 5.3 percent = $74.2 millionAlpharma’s estimate 2004 net income is $74.2 million.(4) Estimate Shares OutstandingMost firm’s number of outstanding shares increases annually becausethey issue stock to raise money, make acquisitions, or provide employeestock options. You can use the 10-year history of sharesoutstanding shown on MSN Money’s 10-year Financial Summary reportto gauge the historical annual share inflation and estimate the numberthe number of shares outstanding at the end of your target year, inthis case, 2004 (Table 6-3).TABLE 6-3 MSN Money lists Alpharma’snumber of shares outstanding at the end ofeach fiscal year.Fiscal YearShares Outstanding(Millions)12/01 44.312/00 29.912/99 37.912/98 27.012/97 25.312/96 21.812/95 21.712/94 21.612/93 21.512/92 21.5