problem: Income Statement Hermann Industries is forecasting following income statement;
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Sales
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$8, 000, 0000
|
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Operating costs excluding Depreciation and amortization
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$4,400,000
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|
|
|
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EBITDA
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$3,600,000
|
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Depreciation and amortization
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800,000
|
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EBIT
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2,800,000
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Interest
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600,000
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EBT
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2,200,000
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Taxes (40%)
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880,000
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Net Income
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$1,320,000
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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?