Edmonds Industries is forecasting the following income statement: Sales ....................................................................................................$10,000,000 Operating costs excluding depreciation & amortization ..................5,500,000
Question:
Edmonds Industries is forecasting the following income statement:
Sales ....................................................................................................$10,000,000
Operating costs excluding depreciation & amortization ..................5,500,000
EBITDA .................................................................................................$ 4,500,000
Depreciation and amortization ...........................................................1,200,000
EBIT ......................................................................................................$ 3,300,000
Interest ......................................................................................................500,000
EBT .......................................................................................................$ 2,800,000
Taxes (40%) ............................................................................................1,120,000
Net income .........................................................................................$ 1,680,000
The CEO would like to see higher sales and a forecasted net income of $2,100,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 6%. 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 $2,100,000 in net income?
Step by Step Answer:
Fundamentals of Financial Management
ISBN: 978-1305635937
Concise 9th Edition
Authors: Eugene F. Brigham