$9.$ Problem $3\mathrm{.}15($Income Statement$)$

eBook Problem Walk$-$Through

Edmonds Industries is forecasting the following income statement:

Sales $$12,000,000$

Operating costs excluding depreciation & amortization $6,600,000$

EBITDA $$5,400,000$

Depreciation and amortization $1,440,000$

EBIT $$3,960,000$

Interest $840,000$

EBT $$3,120,000$

Taxes $(25\%)780,000$

Net income $$2,340,000$

The CEO would like to see higher sales and a forecasted net income of $$3,700,000.$ Assume that operating costs $($excluding depreciation and amortization$)$ are $55\%$ of sales and that depreciation and amortization and interest expenses will increase by $5\%.$ The tax rate, which is $25\%,$ will remain the same. $($Note that while the tax rate remains constant, the taxes paid will change.$)$ What level of sales would generate $$3,700,000$ in net income? Round your answer to the nearest dollar, if necessary.

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