1. Fuzzy Button 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 80% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Fuzzy Button expects to pay $300,000 and $722,925 of preferred and common stock dividends, respectively. Fuzzy Button Clothing CompanyIncome Statement for Year Ending December 31 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 (40%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained earnings Year 1 Year 2 (Forecasted) $15,000,000 12,000,000 600,000 600,000 $2,400,000 240,000 $2,160,000 S 864,000 $1,296,000 $ 300,000 $996,000 $ 583,200 $412,800 Given the results of the previous income statement calculations, complete the following statements: $583,575 In Year 2, if Fuzzy Button has 25,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Fuzzy Button has 200,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to In Year 2. Fuzzy Button's before interest, taxes, depreciation and amortization (EBITDA) value changed from to It is In Year 2. in Year 1 to say that Fuzzy Button's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $412,800 and $583,575, respectively. This is because of the items reported in the income statement involve payments and receipts of cash.