Fuzzy Button Clothing Company's income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year.

1. Fuzzy Button is able to achieve this level of increased sales, but it's interest costs increased from 10% to 15% of earnings before interest and taxes (EBIT).

2. 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.

3. The company tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBIT).

4. In year 2, Fuzzy Button expects to pay $100,000 and $833,850 of preferred and common stock dividends, respectively.

Complete the Year 2 income statement data for Fuzzy Button, then answer the questions that follow. Round each dollar value to the nearest Fuzzy Button Clothing Company Income Statement for Year Ending December 31 Year 2 Year 1 (Forecasted) Net sales $15,000,000 11,250,000 600,000 $3,150,000 315,000 2,835,000 1,134,000 $1,701,000 100,000 1,601,000 680,400 $920,600 Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses 600,000 Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Less: Taxes (40%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained earnings $1,150,775 Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Fuzzy Button has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Fuzzy Button has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from 2. in Year 1 to in Year Fuzzy Button's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2. to say that Fuzzy Button's net inflows and outflows of cash at the end of Years It is 1 and 2 are equal to the company's annual contribution to retained earnings, $920,600 and $1,150,775, respectively. This is because statement involve payments and receipts of cash. of the item reported in the income