Project the Income Statement of Kangaroo Tail. Your Net Income in Year 3 is ___________.

A. 6,384

B. 7,540

C. 5,790

D. None of the above

I have done everything (?) right so far, but I feel that I messed up somewhere with my Y2 and Y3 projections because I get D. I would like someone to see if there's anything else I should've done, just in case. I believe one of the issues could be Depreciation, Amortization, or Interest Expense.... Please respond as soon as you reasonably can.

Exhibit 5. Recent Financial Statements Year 0 Year 1 Kangaroo Tail Winery Limited Balance Sheet (in $ thousands) Current assets Cash Accounts Receivable Inventory Total current assets 1,940 4,230 6,570 12,740 3,460 6,720 12,030 22,210 Property and Equipment: Equipment Buildings Accumulated depreciation Property and Equipment, net Land Intangibles Total assets 19,800 3,500 23,300 (2.450) 20,850 15,000 2.000 50,590 25,340 5,700 31,040 (4.100) 26,940 16,700 1.500 67,350 3,400 Current liabilities Accounts payable Taxes payable Notes payable - current Total current liabilities 420 7,890 780 2,400 11,070 1.750 5,570 Notes payable 17,500 19,000 Stockholders' equity Common stock Retained earnings Stockholders' equity Liabilities and stockholders' equity 23,000 4.520 27.520 50,590 30,560 6.720 37.280 67,350 Year 1 22,230 (7,200) 15,030 Exhibit 5. Recent Financial Statements (cont.) Kangaroo Tail Winery Limited Income Statement in $ thousands) for the year ended Revenue Cost of sales Gross Profit Operating expenses: Wages and salaries Selling and general administrative Depreciation Amortization Total operating expenses Operating profit Interest Income before income taxes Income taxes Net income 3,490 2,280 1,650 500 7.920 7,110 (1,091) 6,020 (560) 5,460 Kangaroo Tail Winery Limited Statement of Retained Earnings (in $ thousands) for the year ended Retained earnings - beginning of the year Net income Dividends Retained earnings - end of the year Year 1 4,520 5,460 (3,260) 6,720 Historical 20x1 Projected 2 0x2 Projected 20x3 INCOME STATEMENT 22,230 $ Revenue Growth (%) $ N/A 23,342 $ 5% 23,575 1% Cost of Goods Sold % of Sales 7,200 32% 7,560 32% 7,636 32% Gross Profit % of Sales 15,030 68% 15,782 68% 15,939 68% Operating Expenses (SG&A) % of Sales 5,770 26% 6,119 26% 26% 1,650 Depreciation Amortization Operating Profit (EBIT) 1,650 500 7,110 1,650 500 7,573 500 7,670 Interest Expense 1,091 1,091 1,091 Pretax Income (EBT) 6,019 6,482 6,579 560 Income Tax Expense Tax Rate 603 9% 612 9% 9% Net Income $ 5,459 $ 5,879 $ 5,967 Operating Income (EBIT) Depreciation Amortization EBITDA 7,110 1,650 500 9,260 7,573 1,650 500 7,670 1,650 500 9,820 9,723