Green Caterpillar Garden Supplies Inc.'s income statement reports data for its first year of operation. The...

   

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Green Caterpillar Garden Supplies Inc.'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. Green Caterpillar 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 60% 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, Green Caterpillar expects to pay $100,000 and $2,463,300 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Green Caterpillar, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Green Caterpillar Garden Supplies Inc. Income Statement for Year Ending December 31 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 Year 1 $30,000,000 18,000,000 1,200,000 $10,800,000 1,080,000 9,720,000 3,888,000 $5,832,000 100,000 5,732,000 2,041,200 $3,690,800 Given the results of the previous income statement calculations, complete the following statements: Year 2 (Forecasted) 1,200,000 $4,474,700 • In Year 2, if Green Caterpillar has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. Given the results of the previous income statement calculations, complete the following statements: • In Year 2, if Green Caterpillar has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect receive in annual dividends. • If Green Caterpillar has 500,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 2. in Year 1 to • Green Caterpillar's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. in Year 1 to . It is to say that Green Caterpillar's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $3,690,800 and $4,474,700, respectively. This is because of the item reported in the income statement involve payments and receipts of cash. Green Caterpillar Garden Supplies Inc.'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. Green Caterpillar 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 60% 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, Green Caterpillar expects to pay $100,000 and $2,463,300 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Green Caterpillar, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Green Caterpillar Garden Supplies Inc. Income Statement for Year Ending December 31 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 Year 1 $30,000,000 18,000,000 1,200,000 $10,800,000 1,080,000 9,720,000 3,888,000 $5,832,000 100,000 5,732,000 2,041,200 $3,690,800 Given the results of the previous income statement calculations, complete the following statements: Year 2 (Forecasted) 1,200,000 $4,474,700 • In Year 2, if Green Caterpillar has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. Given the results of the previous income statement calculations, complete the following statements: • In Year 2, if Green Caterpillar has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect receive in annual dividends. • If Green Caterpillar has 500,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 2. in Year 1 to • Green Caterpillar's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. in Year 1 to . It is to say that Green Caterpillar's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $3,690,800 and $4,474,700, respectively. This is because of the item reported in the income statement involve payments and receipts of cash.

Answer rating: 100% (QA)

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