Cute 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 year.
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 80% 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 $300,000 and $1,445,850 of preferred and common stock dividends, respectively.