Hermann industries is forecasting the following income statement ging3-8INCOME STATEMENT Hermann Industries is forecasting the following income statement:msSales$8,000,000Operating costs excluding depr. & amort.4,400,000EBITDA$3,600,000Depreciation & amortization800,000$2,800,000EBITInterest600,000$2,200,000EBTTaxes (40%)880,000Net income$1,320,000The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assumethat operating costs (excluding depreciation and amortization) are 55% of sales and thatdepreciation and amortization and interest expenses will increase by 10%. The tax rate, whichis 40%, will remain the same. What level of sales would generate $2,500,000 in net income?

Net income=$2,500,000 Tax=40% This implies EBT-40% of EBT=Net income60% of…

3-8 INCOME STATEMENT Hermann Industries is forecasting the following income statement: Sales $8,000,000 Operating costs excluding depr. & amort. 4,400,000 ЕВITDA $3,600,000 Depreciation & amortization 800,000 EBIT $2,800,000 Interest 600,000 EBT $2,200,000 Taxes (40%) 880,000 $1,320,000 Net income The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that 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 $2,500,000 in net income?

3-8 INCOME STATEMENT Hermann Industries is forecasting the following income statement: Sales $8,000,000 Operating costs excluding depr. & amort. 4,400,000 ЕВITDA $3,600,000 Depreciation & amortization 800,000 EBIT $2,800,000 Interest 600,000 EBT $2,200,000 Taxes (40%) 880,000 $1,320,000 Net income The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that 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 $2,500,000 in net income?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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