SOLUTION: Hermann Industries is forecasting the following income statement:
Sales $10,000,000
Operating costs (excluding depreciation and amortization) 5,500,000
EBITDA $4,500,000
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Question 359118: Hermann Industries is forecasting the following income statement:
Sales $10,000,000
Operating costs (excluding depreciation and amortization) 5,500,000
EBITDA $4,500,000
Depreciation and amortization 1,000,000
EBIT $3,500,000
Interest 500,000
EBT $3,000,000
Taxes (40%) 1,200,000
Net income $1,800,000
The CEO would like to see higher sales and a forecasted net income of $2,430,000.
Assume that operating costs (excluding depreciation and amortization) are 55% of sales, and depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,430,000 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.
Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!
D&A was $1M, but increased 10%, so is now $1.1M, hence:
Interest was $0.5M, but increased 10% so is now $0.55M, hence:
)
Now solve for Sales as a function of Net Income (NI):
\ = \text{NI})
Don't forget to round your answer.
John
My calculator said it, I believe it, that settles it
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