Cold Goose Metal Works Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales increase by 25% next year. 1. Cold Goose 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, Cold Goose expects to pay $100,000 and $1,071,000 of preferred and common stock dividends, respectively. Complete the Year income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Cold Goose Metal Works Inc. Income Statement for Year Ending Decem ber 31 Year 2 Year 1 (Forecasted) Net sales $25,000,000 Less: Operating costs, except depreciation and amortization 20,000,000 Less: Depreciation and amortization expenses 1,000,000 1,000,000 Operating income (or EBIT) $4,000,000 Less: Interest expense 400,000 Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Cold Goose Metal Works Inc. Income Statement for Year Ending December 31 Year 2 (Forecasted) Year 1 Net sales $25,000,000 Less: Operating costs, except depreciation and amortization 20,000,000 Less: Depreciation and amortization expenses 1,000,000 1,000,000 $4,000,000 Operating income (or EBIT) Less: Interest expense 400,000 Pre-tax income (or EBT) 3,600,000 Less:Taxes (40%) 1,440,000 Earnings after taxes $2,160,000 Less: Preferred stock dividends 100,000 Earnings available to common shareholders Less: Common stock dividen ds 2,060,000 864,000 $1,196,000 $1,506,500 Contribution to retained earnings Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Cold Goose has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Cold Goose has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change in Year 2. from in Year 1 to Cold Goose's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2. It is to say that Cold Goose's net inflows and outflows of cash at the end of Years 1 and are equal to the company's annual of the item reported in the contribution to retained earnings, $1,196,000 and $1,506,500, respectively. This is because income statement involve payments and receipts of cash. Flash Player WIN 32,0,0,223
