Question
Hermann Industries is forecasting the following income statement: ---------------------------------------------------------------------------------------------------------------------- Sales $5,000,000 Operating costs excluding depreciation & amortization 2,750,000 EBITDA $2,250,000 Depreciation and amortization 500,000 EBIT
Hermann Industries is forecasting the following income statement:
----------------------------------------------------------------------------------------------------------------------
Sales $5,000,000
Operating costs excluding depreciation & amortization 2,750,000
EBITDA $2,250,000
Depreciation and amortization 500,000
EBIT $1,750,000 Interest 500,000
EBT $1,250,000
Taxes (40%) 500,000
Net income $750,000
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The CEO would like to see higher sales and a forecasted net income of $1,275,000. 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 40%, will remain the same. What level of sales would generate $1,275,000 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.
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