Question: Income Statement Hermann Industries is forecasting following income statement;
Sales
|
$8, 000, 0000
|
Operating costs excluding Depreciation and amortization
|
$4,400,000
|
|
|
EBITDA
|
$3,600,000
|
Depreciation and amortization
|
800,000
|
EBIT
|
2,800,000
|
Interest
|
600,000
|
EBT
|
2,200,000
|
Taxes (40%)
|
880,000
|
Net Income
|
$1,320,000
|
The CEO would like to see a higher sales & a predicted net income of $2,500,000
Suppose 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 create $2,500,000 in net income?