Problem 3-13 Income Statement Hermann Industries is forecasting the following in

Question

Problem 3-13
Income Statement

Hermann Industries is forecasting the following income statement:

The CEO would like to see higher sales and a forecasted net income of $2,697,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 15%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,697,000 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.

Answer: $______________

Show calculation please. Thanks!

Sales $10,000,000 Operating costs excluding depreciation & amortization 5,500,000 EBITDA $4,500,000 Depreciation and amortization 600,000 EBIT $3,900,000 Interest 1,000,000 EBT $2,900,000 Taxes (40%) 1,160,000 Net income $1,740,000

Explanation / Answer

(0.45*sales-690,000-1,150,000)(1-0.4)=2,697,000
sales=14,077,777.78

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