You have developed the following pro forma income statement for your? corporation:?? LOADING.... It represents the...

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Finance

You have developed the following pro forma income statement foryour? corporation:?? LOADING.... It represents the most recent?year's operations, which ended yesterday. Your supervisor in the?controller's office has just handed you a memorandum asking forwritten responses to the following? questions:
a.??If sales should increase by 25 ?percent, by what percentwould earnings before interest and taxes and net income?increase?
b.??If sales should decrease by 25 ?percent, by what percentwould earnings before interest and taxes and net income?decrease?
c.??If the firm were to reduce its reliance on debt financingsuch that interest expense were cut in? half, how would this affectyour answers to parts a and b??
Sales
$
45,750,000
Variable costs
(22,800,000)
Revenue before fixed costs
$
22,950,000
Fixed costs
(9,200,000)
EBIT
$
13,750,000
Interest expense
(1,350,000)
Earnings before taxes
$
12,400,000
Taxes (50%)
(6,200,000)
Net income
$
6,200,000

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You have developed the following pro forma income statement foryour? corporation:?? LOADING.... It represents the most recent?year's operations, which ended yesterday. Your supervisor in the?controller's office has just handed you a memorandum asking forwritten responses to the following? questions:a.??If sales should increase by 25 ?percent, by what percentwould earnings before interest and taxes and net income?increase?b.??If sales should decrease by 25 ?percent, by what percentwould earnings before interest and taxes and net income?decrease?c.??If the firm were to reduce its reliance on debt financingsuch that interest expense were cut in? half, how would this affectyour answers to parts a and b??Sales$45,750,000Variable costs(22,800,000)Revenue before fixed costs$22,950,000Fixed costs(9,200,000)EBIT$13,750,000Interest expense(1,350,000)Earnings before taxes$12,400,000Taxes (50%)(6,200,000)Net income$6,200,000

Sales	$	45,750,000
Variable costs		(22,800,000)
Revenue before fixed costs	$	22,950,000
Fixed costs		(9,200,000)
EBIT	$	13,750,000
Interest expense		(1,350,000)
Earnings before taxes	$	12,400,000
Taxes (50%)		(6,200,000)
Net income	$	6,200,000