Question

Edmonds Industries is forecasting the following income statement:

Sales	$6,000,000
Operating costs excluding depreciation & amortization	3,300,000
EBITDA	$2,700,000
Depreciation and amortization	900,000
EBIT	$1,800,000
Interest	360,000
EBT	$1,440,000
Taxes (40%)	576,000
Net income	$864,000

The CEO would like to see higher sales and a forecasted net income of $1,425,600. 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. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $1,425,600 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.

Answer 1