Income Statement Hermann Industries is forecasting the following income statemen
ID: 2696199 • Letter: I
Question
Income Statement
Hermann Industries is forecasting the following income statement:
The CEO would like to see higher sales and a forecasted net income of $2,092,500. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 13%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,092,500 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.
$
Explanation / Answer
Sales $9,000,000
Operating costs excluding depreciation & amortization $4,950,000
EBITDA $4,050,000
Depreciation and amortization $450,000
EBIT $3,600,000
Interest $810,000
EBT $2,790,000
Taxes (40%) $1,116,000
Net income $1,674,000