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Business, 13.10.2020 05:01 ineedhelp2322

Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Blue Hamster Manufacturing Inc Income Statement for Year Ending December 31

Year 1 Year 2

Net sales $15,000,000
Less: Operating costs, except depreciation and amortization 9,000,000
Less: Depreciation and amortization expenses 600,000 600,000
Operating income (or EBIT) $5,400,000
Less: Interest expense 540,000
Pre-tax income (or EBT) 4,860,000
Less: Taxes (25%) 1,215,000
Earnings after taxes $3,645,000
Less: Preferred stock dividends 100,000
Earnings available to common shareholders 3,545,000
Less: Common stock dividends 1,458,000
Contribution to retained earnings $2,087,000 $2,539,250

Consider the following scenario:

1. Blue Hamster Manufacturing 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, Blue Hamster 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, Blue Hamster expects to pay $100,000 and $1,407,600 of preferred and common stock dividends, respectively.

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Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. B...
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