Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1. Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest
1. Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its depreciation and amortization expenses remain constant from year to year 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Cute Camel expects to pay $100,000 and $1,773,844 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Year 2 (Forecasted) 800,000 Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Less: Taxes (25%) Earnings after taxes Less: Preferred stock dividends Eamings available to common shareholders Less: Common stock dividends Contribution to retained earnings Cute Camel Woodcraft Company Income Statement for Year Ending December 31 Year 1 $20,000,000 13,000,000 800,000 $6,200,000 620,000 5,580,000 1,395,000 $4,185,000 100,000 4,085,000 1,464,750 $2,620,250 100,000 1,773,844 $3,194,281
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started