Use AstroTurf Company’s income statement below to answer the following two questions.
a. Calculate AstroTurf’s EBITDA.
b. Determine what level of sales would generate $3.3m in net income for the following year (Year 2), knowing that operating costs (excl. depreciation and amortization) will increase by 5%. The tax rate will not change.
Year 1 Income Statement:
Sales: $11m
Operating costs (excl. depreciations & amortization): $4.5m
Depreciation and amortization: $1.5m
Interest: $0.7m
Net Income: $2.8m
Tax Rate: 35%
