Question

INCOME STATEMENT

Edmonds Industries is forecasting the following income statement:

Sales	$4,000,000
Operating costs excluding depreciation & amortization	2,200,000
EBITDA	$1,800,000
Depreciation and amortization	600,000
EBIT	$1,200,000
Interest	200,000
EBT	$1,000,000
Taxes (40%)	400,000
Net income	$600,000

The CEO would like to see higher sales and a forecasted net income of $1,020,000. 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. (Note that while the tax rate remains constant, the taxes paid will change.) What level of sales would generate $1,020,000 in net income? If necessary, round your answer to the nearest dollar at the end of the calculations.

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Answer 1