Given the following data for LMN Ltd:

• Revenue: $350,000
• Returns and Allowances: $30,000
• Net Revenue: $320,000
• Cost of Goods Sold: $140,000
• Operating Expenses: $80,000
• Interest Expense: $7,000
• Tax Rate: 28%

Requirements:

1. Prepare an income statement.
2. Calculate the net profit margin.
3. Compute the total tax expense.
4. Determine how a 5% increase in revenue would affect the net income.
5. Discuss the significance of interest expense in financial performance.