Question
The HMT Industries is forecasting the following income statement for the upcoming year: Sales $ 8,000,000 Operating costs (excluding depreciation & amortization) (4,400,000) EBITDA $
The HMT Industries is forecasting the following income statement for the upcoming year: Sales $ 8,000,000 Operating costs (excluding depreciation & amortization) (4,400,000) EBITDA $ 3,600,000 Depreciation & Amortization (800,000) EBIT 2,800,000 Interest (600,000) EBT 2,200,000 Taxes (40%) (880,000) Net income 1,320,000 The company's CEO is disappointed with the forecast and would like to see HMT generate higher sales and a forecasted net income of $ 2,500,000. Assume that operating costs (excluding depreciation & amortization) are always 55% of sales. Assume that the company's depreciation & amortization and interest expenses will increase by 10% from what they are now. The company's tax rate, which is 40% will remain the same. a) What level of sales would the firm have to obtain to generate $ 2,500,000 in net income?
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