Question

Listed below is the 2021 income statement for Tom and Sue Travels, Inc. TOM AND SUE TRAVELS, INC. Income Statement for Year Ending December 31, 2021 (in millions of dollars) Net sales $17.600 Less: Cost of goods sold 8.000 Gross profits $ 9.600 Less: Other operating expenses 3.650 Earnings before interest, taxes, depreciation, and amortization (EBITDA) $ 5.950 Less: Depreciation 2.800 Earnings before interest and taxes (EBIT) $ 3.150 Less: Interest 0.790 Earnings before taxes (EBT) $ 2.360 Less: Taxes 0.496 Net income $ 1.864 The CEO of Tom and Sue's wants the company to earn a net income of $2.700 million in 2022. Cost of goods sold is expected to be 60 percent of net sales, depreciation and other operating expenses are not expected to change, interest expense is expected to increase to $1.256 million, and the firm's tax rate will be 21 percent. Calculate the net sales needed to produce net income of $2.700 million. (Enter your answer in millions of dollars rounded to 3 decimal places.) Net sales million

Answer 1

	2021	2022
Net Sales	17.6	27.8093038
Less: Cost of goods sold	8	16.68558228
Gross Profits	9.6	11.12372152
Less: Other Operating Expenses	3.65	3.65
EBITDA	5.95	7.473721519
Less: Depreciation	2.8	2.8
EBIT	3.15	4.673721519
Less: Interest	0.79	1.256
EBT	2.36	3.417721519
Less: Taxes	0.496	0.717721519
Net Income	1.864	2.7
Hence, required sales = $27.8093 million
i.e. $27.809 million

Α 1 2 Net Sales 3 Less: Cost of goods sold 4 Gross Profits 5 Less: Other Operating Expenses 6 EBITDA 7 Less: Depreciation 8 EBIT 9 Less: Interest 10 EBT 11 Less: Taxes 12 Net Income BC 2021 2022 17.6 =C4/40% =C2*60% =B2-B3 =C6+C5 3.65 3.65 =B4-B5 =C7+C8 2.8 2.8 =B6-B7 =C9+C10 0.79 1.256 =B8-B9 =C12/(1-0.21) =B10*21% =C10*21% =B10-B11 2.7 13 14 Hence, required sales = $27.8093 million 15 i.e. $27.809 million