Question: Blue Hamster Manufacturing Inc.?s income statement reports data for its first year of operation. The firm?s CEO would like sales to increase by 25v/o next


Blue Hamster Manufacturing Inc.?s income statement reports data for its first year of operation. The firm?s CEO would like sales to increase by 25v/o next year. 1. Blue Hamster is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company?s operating costs (excluding depreciation and amortization) remain at 80% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company?s tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Blue Hamster expects to pay $100,000 and $642,600 of preferred and common stock dividends, respectively
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