Ch $06$: Assignment $-$ Accounting for Financial Manag$$ment

Cute Camel 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$).$

The company's operating costs $($excluding depreciation and amortization$)$ remain at $75\%$ of net sales, and its depreciation and amortization expenses remain constant from year to year.

The company's tax rate remains constant at $40\%$ of its pre$-$tax income or earnings before taxes $($EBT$).$

In Year $2,$ Cute Camel expects to pay $$100,000$ and $$1,111,800$ of preferred and common stock dividends, respectively.

Complete the Year $2$ income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar.

Cute Camel Woodcraft CompanyIncome Statement for Year Ending December $31$

$\backslash$table$[[v,.,$Year $1,$Year $2($Forecasted$)],[$Net sales,,$$20,000,000,],[$Less: Operating costs, except depreciation and amortization,t$,15,000,000,],[$Less: Depreciation and amortizat$$n expenses,,$800,000,800,000],[$Operating income $($or EBIT$),,$$$4,200,000,],[$Less: Interest expense,,$420,000,],[$Pre$-$tax income $($or EBT$),,$$$3,780,000,],[$Less: Taxes $(40\%),,1,512,000,],[$Earnings after taxes,,$$2,268,000,],[$Less: Preferred stock dividends,,$100,000,],[$Earnings available to common shareholders,$*.),$$$2,168,000,],[$Less: Common stock dividends,,$907,200,],[$Contribution to retained earnings,,$$1,260,800,$$$1,567,700$