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The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?

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mltn1980

Answer:

The answer is  $11.904.762  

There an assumption about Depreciation, Amortization and Interest, it says increase by 10% over which there is no data to calculate,so It's used 10% of sales.

Explanation:

Income Statement  

Sales  $11.904.762  

Cost of goods sold -$6.547.619  

Gross Profit  $5.357.143  

depreciation, amortization and Interest -$1.190.476  

Net Income BEFORE Taxes $4.166.667  

Tax RATE 40%  -$1.666.667  

Net Income after Taxes  $2.500.000  

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