Edmonds Industries is forecasting the following income statement: Sales Operatin

Question

Edmonds Industries is forecasting the following income statement: Sales Operating costs excluding depreciation & amortization EBITDA Depreciation and amortization EBIT Interest EBT Taxes (40%) Net income The CEO would like to see higher sales and a forecasted net income of $2,008,800. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 5%. The tax rate, which is 40%, will remain the same. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $2,008,800 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations $9,000,000 4,950,000 $4,050,000 450,000 $3,600,000 810,000 ?2,790,000 1,116,000 $1,674,000

Explanation / Answer

Calculation of new level of Sales

EBT=20,08,800+(20,08,800*40/60)= 33,48,000

Add: Interest (810,000+5%) 8,50,500

EBIT 41,98,500

Add: Depreciation & Amortization (450,000+5%) 4,72,500   

EBITDA 46,71,000

Sales=46,71,000*100/45= $1,03,80,000

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