Question

complete the year 2 income statement data for cute camel

Dute Camel Woodcraft Company's income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next rear 1. Cute Camel 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 65% 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, Cute Camel expects to pay $200,000 and $1,520,438 of preferred and common stock dividends, respectively.

Answer 1

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| | p = = = 3 4 g w 2 v 1* 04:30 ENG 23-02-2020512 X AZ991 fx AT AR AS AU AW AX AY AZ BA - 976 977 978 979 980 981 982 983 984 LESS LESS 985 986 LESS 987 988 NET SALES OPERATING COST DEPRECIATION & AMORT EXP EBIT INTEREST EBT TAX EAT PREFERRED STOCK DIVIDEND EARNINGS FOR COMMON SHAREHOLDERS COMMON STOCK DIVIDENDS CONTRIBUTION TO RETAINED EARNINGS YEAR 1 YEAR 2 (FORECASTED) 25000000 31250000 (25000000*(1+0.25) 16250000 20312500 65% OF SALES 1000000 1000000 7750000 9937500 775000 1490625 15% OF EBIT 6975000 8446875 2790000 3378750 4185000 5068125 200000 200000 3985000 4868125 1255500 1520438 2729500 3347687 LESS 989 990 991 LESS LESS 992 993 994 995 no of shares = 400000 400000 EPS = EARNINGS/ NO OF SHARES 9.96 12.17 996 997 998 999 ... CASH BUDGET budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont ...

04:34 w ? v . * 5 ENG 23-02-2020 12 • In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive 200000/5000 = $40 in annual dividends. • If Cute Camel has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from 3985000/400000 = $9.96 in Year 1 to 4868125/400000 = $12.17 in Year 2 • Cute Camel's before interest, taxes, depreciation and amortization (EBITDA) value changed from 8,750,000 in Year 1 to 10,937,500 in Year 2. • It is wrong to say that Cute Camel'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, $2729500 and $3347687, respectively. This is because not all of the item reported in the income statement involve payments and receipts of cash.