Income Statement The CEO would like to see higher sales and forecased net income
ID: 2330493 • Letter: I
Question
Income Statement
The CEO would like to see higher sales and forecased net income of $3,182,400. Assume that operation costs (excluding depreciation and amortization) are 55% of sales that depreciation and amortization and interest expenses will increase by 5%. The tax rate, which is 40%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) what level of sales would generate $3,182,400 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.
Sales $12,000,000 Operating Cost excluding depreciation &amortization 6,600,000 EBITDA $5,400,000 Depreciation and amortization 1,200,000 EBIT $4,200,000 Interest 1,080,000 EBT $3,120,000 Taxes (40%) 1,248,000 Net Income $1,872,000Explanation / Answer
Sales(100%)(7,698,000/0.45) $17,106,667(Approx) Operating Cost excluding depreciation &amortization(55%)($17,106,667*0.55) $9,408,667 EBITDA(45%)(6,438,000+1,260,000) 7,698,000 Depreciation and amortization(1,200,000*1.05) 1,260,000 EBIT(5,304,000+1,134,000) 6,438,000 Interest(1,080,000*1.05) 1,134,000 EBT(100%)(3,182,400/0.6) 5,304,000 Tax(40%)(5,304,000*0.4) 2,121,600 Net income(60%) 3,182,400