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financial statements15

financial statements15 - to achieve Assume that Hebner’s...

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Sales level Answer: e Diff: M i . Hebner Housing Corporation has forecast the following numbers for this upcoming year: Sales = $1,000,000. Cost of goods sold = 600,000. Interest expense = 100,000. Net income = 180,000. The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company’s sales were to increase to $1.5 million, its cost of goods sold would increase to $900,000. The company’s CEO is unhappy with the forecast and wants the firm to achieve a net income equal to $240,000. In order to achieve this level of net income, what level of sales will the company have
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Unformatted text preview: to achieve? Assume that Hebner’s interest expense remains constant. a. $ 400,000 b. $ 500,000 c. $ 750,000 d. $1,000,000 e. $1,250,000 i . Sales level Answer: e Diff: M This question requires working backwards through the income statement from net income to sales. The income statement will look like this: Sales $1,250,000 $500,000/(1 - 0.6) CGS (60%) 750,000 $1,250,000 × 0.6 EBIT $ 500,000 $100,000 + $400,000 Interest 100,000 (Given) EBT $ 400,000 $240,000/(1 - 0.4) Tax (40%) 160,000 NI $ 240,000...
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