Question

Simeon Industries is forecasting the following income statement: Sales $16,000,000 Operating costs excluding      depreciation 7,200,000...

Simeon Industries is forecasting the following income statement:

Sales

$16,000,000

Operating costs excluding
     depreciation


7,200,000

EBITDA

$ 8,800,000

Depreciation

1,000,000

EBIT

$ 7,800,000

Interest

2,500,000

EBT

$ 5,300,000

Taxes (40%)

2,120,000

Net income

$ 3,180,000


The CEO would like to see higher sales and a forecasted net income of $5,500,000. Assume that operating costs (excluding depreciation) are 45% of sales and that depreciation and interest expenses will increase by 15%. The tax rate will remain at 40%. What level of sales would generate $5,500,000 in net income?

Selected Answer:

Answers:

a.

$23,984,848

b.

$20,919,177

c.

$18,320,000

d.

$18,845,000

e.

$28,863,636
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