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problem: 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

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M916163

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