Question
Income statement 3.Van Auken Industries is forecasting the following income statement for the upcoming year: Sales$5,074,073 Operating Costs (excluding depreciation)2,790,740 Depreciation 725,000 EBIT$1,558,333 Interest 225,000
Income statement
3.Van Auken Industries is forecasting the following income statement for the upcoming year:
Sales$5,074,073
Operating Costs (excluding depreciation)2,790,740
Depreciation 725,000
EBIT$1,558,333
Interest225,000
EBT$1,333,333
Taxes (40%)533,333
Net Income$800,000
Assume that operating costs (excluding depreciation) are always 55% of sales.Also assume that depreciation, interest expense, and the companys tax rate of 40% (not total taxes paid), will remain the same, even if sales change.
The companys president is disappointed with the forecast and would like to see Van Auken generate higher sales and a forecasted net income of $1,000,000.What level of sales would Van Auken have to obtain in order to generate $1,000,000 in net income?
a.$5,814,816
b.$6,333,450
c.$7,222,100
d.$8,000,000
e.$ 9,775,125
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