Swann Systems is forecasting the following income statement for the upcoming year: Sales 5,000,000 Operating costs (excluding depreciation and amortization)(3,000,000) EBITDA 2,000,000 Depreciation and amortization (500,000) EBIT 1,500,000 Interest (500,000) EBT 1,000,000 Taxes (40%) (400,000) Net income 600,000 The company’s president is disappointed with the forecast and would like to see Swann generate higher sales and a forecasted net income of $2,000,000. Assume that operating costs (excluding depreciation and amortization) are always 60 percent of sales. Also, assume that depreciation and amortization, interest expense, and the company’s tax rate, which is 40 percent, will remain the same even if sales change. What level of sales would Swann have to obtain to generate $2,000,000 in net income?
Swann Systems is
Sales 5,000,000
Operating costs (excluding
Depreciation and amortization (500,000)
EBIT 1,500,000
Interest (500,000)
EBT 1,000,000
Taxes (40%) (400,000)
Net income 600,000
The company’s president is disappointed with the forecast and would like to see Swann generate higher sales and a forecasted net income of $2,000,000.
Assume that operating costs (excluding depreciation and amortization) are always 60 percent of sales. Also, assume that depreciation and amortization, interest expense, and the company’s tax rate, which is 40 percent, will remain the same even if sales change. What level of sales would Swann have to obtain to generate $2,000,000 in net income?
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