eBook Problem Walk-Through

Edmonds Industries is forecasting the following income statement:

Sales	$12,000,000
Operating costs excluding depreciation & amortization	6,600,000
EBITDA	$5,400,000
Depreciation and amortization	1,320,000
EBIT	$4,080,000
Interest	1,200,000
EBT	$2,880,000
Taxes (25%)	720,000
Net income	$2,160,000

The CEO would like to see higher sales and a forecasted net income of $3,670,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 25%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $3,670,000 in net income? Round your answer to the nearest dollar, if necessary.

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