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

eBook

$3-3$: The Income Statement

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 $1,680,000$

EBIT $$3,720,000$

Interest $840,000$

EBT $$2,880,000$

Taxes $(25\%)720,000$

Net income $$2,160,000$

The CEO would like to see higher sales and a forecasted net income of $$4,150,000.$ Assume that operating costs $($excluding depreciation and amortization$)$ are $55\%$ of sales and that depreciation and amortization and interest expenses will increase by $14\%.$ The tax rate, which is $25\%,$ will remain the same. $($Note that while the tax rate remains constant, the taxes paid will change.$)$ What level of sales would generate $$4,150,000$ in net income? Round your answer to the nearest dollar, if necessary.

$