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What is the year 2 forecasted values for the income sheet proovided below? What are

Fuzzy Button Clothing Companys income statement reports data for its first year of operation. The firms CEO would like sales to increase by 25% next year. 1. Fuzzy Button 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 companys 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 companys tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Fuzzy Button expects to pay $100,000 and $810,900 of preferred and common stock dividends, respectively.Complete the Year 2 income statement data for Fuzzy Button, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Fuzzy Button Clothing Company Income Statement for Year Ending December 31 Year 2 Year 1 (Forecasted) $10,000,000 6,500,000 400,000 $3,100,000 310,000 2,790,000 1,116,000 $1,674,000 100,000 1,574,000 669,600 $904,400 Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses 400,000 Operating income (or EBIT) Pre-tax income (or EBT) Earnings after taxes Earnings available to common shareholders Contribution to retained earnings Less: Interest expense Less: Taxes (40%) Less: Preferred stock dividends Less: Common stock dividends $1,116,350Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Fuzzy Button has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Fuzzy Button has 400,000 shares of common stock issued and outstanding, then the firms earnings per share (EPS) is expected to change from in Year 1 to in Year 2 Fuzzy Buttons before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2. It is to say that Fuzzy Buttons net inflows and outflows of cash at the end of Years 1 and 2 are equal to the companys annual of the item reported in the income contribution to retained earnings, $904,400 and $1,116,350, respectively. This is because statement involve payments and receipts of cash.

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Answer: Fuzzy Button Clothing Company Income Statement for Year Ending December 31 Year 2 ear 1 (Forecasted) Net Sales Less: Operating Costs, Except Depreciation and Amortization Less: Depreciation and Amortization Operating Income (or EBIT) Less: Interest Expense Pre-Tax Income (or EBT) Less: Taxes (40%) Earnings after Taxes Less: Preferred Stock Dividends Earnings available to Common Shareholders Less: Common Stock Dividends Contribution to Retained Earnings 10000000 12500000 8125000 400000 3975000 596250 3378750 1351500 2027250 100000 1927250 810900 1116350 6500000 400000 3100000 310000 2790000 1116000 1674000 100000 1574000 669600 904400 In Year 2, if Fuzzy Button has 5,000 Shares of Preferred Stock issued and outstanding, then each preferred Share should expect to receive $20 ($100,000 5,000) in annual dividends . If Fuzzy Button has 400,000 shares of Common Stock issued and outstanding, then the firms earnings per share is expected to change from $3.94 ($1,574,000/400,000) in Year 1 to $4.82 ($1,927,250 / 400,000) in Year 2 Fuzzy Buttons before Interest, Taxes, Depreciation and Amortization (EBITDA) va lue changed from $3,500,000 in Year 1 to $4,375,000 in Year 2. It is unreasonable to say that Fuzzy Buttons Net inflows and outflows of cash at the end of Years 1 and 2 are equal to the Companys annual contribution to Retained Earnings, $904,400 and $1,116,350 respectively. This is because all but one of the items reported in the Income statement involves payments and receipts of Cash.

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