PROBLEM 5 Year Ending December 31, 2016 Year Ending December 31, 2017 YEAR 2-BASED ON INCREASED SALES Sales Sales $ 5,000,000 $5.5 00, 000 Less Variable operating costs (0.60 x Sales) $3,000,000 Less Variable Costs (.60 x Sales) $3,300,000 Fixed operating costs 1,000,000 Fixed Operating Costs 4,000,000 4.300,000 Total operating costs 4 000 000 Total Operating Costs Earnings before interest and taxes $ 1,000,000 Earnings Before Interest and Taxes $1, 200, 000 Less: Interest payments (fixed capital cost) 250.000 Less' Interest Payments (Fixed Capital Cost) 250,000 $ 450, 000 Earnings before taxes S 750,000 Earnings Before Taxes 380, 000 Less. Income taxes (variable), 40% 300.000 Less: Income Taxes (Variable) 40% Earnings after taxes $ 450,000 Earnings After Taxes $ 5 70, 000 Less Preferred dividends (fixed capital cost) 150,000 Less Preferred Dividends (Fixed Capital Cost) 150, 000 Earnings available to common stockholders 300 0D Earnings Available to Common Stockholders $ 4 20, 000 Earnings per share (100,000 shares) 3 00 Earnings Per Share (100,000) 4.20 USING THE SPREADSHEET ABOVE, ASSUME THAT SALES INCREASE BY 10% FROM YEAR I TO YEAR 2: Fill in Column 2 - (Year 2) with the changes per row, (WITH ALL ROWS IN COLUMN 2 BEING FILLED IN) beginning with Sales based on the new increased in sales, and ending with Earnings Per Share. Assume that Fixed Operating Costs, Interest payments (fixed capital costs), and Preferred Dividends-(Fixed Capital Costs) are the same in Year ] and Year 2. For Year 2, there are still 100.000 shares outstanding