Question: Swann Systems has forecast this income statement for the upcoming year:
|
Sales
|
$5,000,000
|
|
Operating costs (excluding depr and amort)
|
3,000,000
|
|
EBITDA
|
$2,000,000
|
|
Depreciation and amortization
|
500,000
|
|
EBIT
|
$1,500,000
|
|
Interest
|
500,000
|
|
EBT
|
$1,000,000
|
|
Taxes (40%)
|
400,000
|
|
Net income
|
$600,000
|
The company's president is unsatisfied with the forecast and wants to see higher sales and a forecasted net income of $2,000,000.
Suppose that operating costs are always sixty percent of sales, & that depreciation and amortization, interest expense, and the company's tax rate [40 percent], will remain the same even if sales change. How much in sales would Swann have to obtain to generate $2,000,000 in net income?
[A] $ 5,800,000
[B] $ 6,000,000
[C] $ 7,200,000
[D] $ 8,300,000
[E] $10,833,333