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Blue Hamster Manufacturing Inc. ' s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by

Blue Hamster Manufacturing Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25%
next year.
Blue Hamster 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).
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.
The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT).
In Year 2, Blue Hamster expects to pay $100,000 and $1,773,844 of preferred and common stock dividends, respectively.
Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the
nearest whole dollar.
Blue Hamster Manufacturing Inc.Income Statement for Year Ending December 31Blue Hamster Manufacturing Inc.s income statement reports data for its first year of operation. The firms CEO would like sales to increase by 25% next year.Ch 06: Assignment - Accounting for Financial Management
Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the
nearest whole dollar.
Blue Hamster Manufacturing Inc.Income Statement for Year Ending December 31
Given the results of the previous income statement calculations, complete the following statements:
In Year 2, if Blue Hamster has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive
in annual dividends.
If Blue Hamster has 500,000 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.
Blue Hamster's before interest, taxes, depreciation and amortization (EBITDA) value changed from
in Year 1 to
' in Year 2.
It is
to say that Blue Hamster'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, $2,620,250 and $3,194,281, respectively. This is because
of the items reported in the income
statement involve payments and receipts of cash.
1. Blue Hamster 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 companys 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 companys tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT).
4. In Year 2, Blue Hamster expects to pay $100,000 and $1,773,844 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar.
Blue Hamster Manufacturing Inc.Income Statement for Year Ending December 31
Year 1 Year 2(Forecasted)
Net sales $25,000,000 $31,250,000
Less: Operating costs, except depreciation and amortization 16,250,00020,312,500
Less: Depreciation and amortization expenses 1,000,0001,000,000
Operating income (or EBIT) $7,750,000
$
Less: Interest expense 775,000
Pre-tax income (or EBT) $6,975,000
$
Less: Taxes (40%)2,790,000
Earnings after taxes $4,185,000
$
Less: Preferred stock dividends 100,000
Earnings available to common shareholders $4,085,000
$
Less: Common stock dividends 1,464,750
Contribution to retained earnings $2,620,250 $3,194,281
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