Revenue from sales based on projected net income

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Reference no: EM1315927

Forecasting revenue from sales based on projected net income and operating costs.

Income Statement Hermann Industries is forecasting the following income statement:

Sales	$8, 000, 0000
Operating costs excluding Depreciation and amortization	$4,400,000

EBITDA	$3,600,000
Depreciation and amortization	800,000
EBIT	2,800,000
Interest	600,000
EBT	2,200,000
Taxes (40%)	880,000
Net Income	$1,320,000

The CEO would like to see a higher sales and a forecasted net income of $2,500,000

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

Reference no: EM1315927

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