Sales Revenue $ 1,387,000 - Operating expenses(other than depreciation) 762,850 - EBITDA $ 624,150 - Depreciation expense 300,000 - EBIT $ 324,150- Interest 199,150 - EBT $ 125,000 - Taxes (20%) 25,000 - Net Income $ 100,000 - Cash and equivalents $ 120,000 - Fixed Assets $ 450,000 - Current Liabilities $ 125,000 - Current Ratio 3 X DSO 41 days ROE 15.4%

Game Lodge has no preferred stock only common equity, current liabilities, and long-term debt. The CEO has expressed some interest in bonds and wants to get an estimate on the interest rate. Assume: expected rate of inflation is expected to be 3% next year, fall to 2% for the following year, and decrease to 1% for each of the following years r* is to remain constant at 2% maturity risk premium is 0 for next year, and will increase by .10 for each following year, up to a limit of 1.0%

PRIMARY POST: 1) The CEO would like to see higher sales and a forecasted net income of $250,000. Assume that operating costs (excluding depreciation) will remain at 55% of sales, depreciation expense will increase by 5%, interest expense will not change, and the tax rate will remain the same. What level of sales would generate $250,000 of net income? Show answer in income statement format.

2) Calculate the following using the financial information from 2019: (round to nearest dollar)

a) Accounts Receivable

b) Inventory

c) Total Current Assets

3) Calculate the rate of interest (r) on the following term bonds:

a) 1-year bond

b) 5-year bond

c) 10-year bond

REPLY POST: 1) Indicate whether you agree with the primary post calculation. If you do not agree, explain what the corrected numbers would be.

2) What impact would a change in inflation have on the rate of interest in primary post question 3? Assume inflation is 2% next year, then increases to 3% for the following year, and then increases to 4% for each following year. Calculate the rate of interest (r) with these changes to inflation.