financial projections

Project Description:

genatron wants to estimate what will happen to its income before interest and taxes if its net sales
change from the 2012 level of $1,500,000. refer to genatron’s 2012 income statement below, where
the income before interest and taxes is $247,000 (ebt of $190,000 plus interest of $57,000).
assume that the cost of goods sold are variable expenses and that the other operating expenses are
income statement 2012 2011
net sales $1,500,000 $1,300,000
cost of goods sold 900,000 780,000
gross profit 600,000 520,000
expenses: general and administrative 150,000 150,000
marketing 150,000 130,000
depreciation 53,000 40,000
interest 57,000 45,000
earnings before taxes 190,000 155,000
income taxes 76,000 62,000
net income $114,000 $93,000

a. calculate the expected amount of income before interest and taxes for both a 10 percent
decrease and a 10 percent increase in net sales for next year.
b. determine the percentage change in income before interest and taxes given your
calculations in part a, and determine the degree of operating leverage.
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Price Type: Negotiable

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