Question

A company wants to earn net income of $300,000. Its tax rate is 30% and its interest expense is $100,000. In addition, cost of goods sold is 70% of sales and its depreciation and amortization expenses are $75,000. What must the company’s revenue be for it to achieve its goal?

Question 23 options:

1)	$1,903,730

2)	$1,782,271

3)	$2,011,905

4)	$2,643,538

5)	$2,241,774

Answer 1

Q-23)

Net Income = $300,000

Income before tax = Net Income/(1-Tax rate)

= $300,000/(1-0.30)

Income before tax = $428,571.43

Operating income = Income before tax + Interest expenses

= $428,571.43 + $100,000

Operating income = $528,571.43

- Cost of goods sold = 70% of sales

Let sales be X,

Cost of goods sold = 70% of X = 0.70X

- Operating income = Sales - Costs of Goods sold - Depreciation and amortization expenses

$528,571.43 = X - 0.70X - $75,000

$603,571.43 = 0.30X

X = $2,011,904.77

So, Sales(or Revenue) is $2011,905

Option 3

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