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Analytical problems (15 points each) Ricardo Entertainment recently reported the following income statement: Sales Cost of goods sold EBIT Interest EBT Taxes (40%) Net income

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Analytical problems (15 points each) Ricardo Entertainment recently reported the following income statement: Sales Cost of goods sold EBIT Interest EBT Taxes (40%) Net income $12,000,000 s00000 $ 4,500,000 1500,000 $ 3,000,000 The company's CFO, Fred Mertz, wants to see a 25 percent increase in net income over the next year. In other words, his target for next year's net income is $2,250,000. Mertz has made the following observations: Ricardo's operating margin (EBIT/Sales) was 37.5 percent this past year Mertz expects that next year this margin will increase to 40 percent. Ricardo's interest expense is expected to remain constant. .Ricardo's tax rate is expected to remain at 40 percent On the basis of these numbers, what is the percentage increase in sales that Ricardo needs in order to meet Mertz's target for net income

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