Income statement: Changes in sales needed to achieve a forecasted net income.

Hermann Industries is forecasting the following income statement:

Sales $8,000,000
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 higher sales and a forecasted net income of $2,500,000.

Assume 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 generate $2,500,000 in net income?

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