INCOME STATEMENT Hermann Industries is forecasting the following income statement: Sales $8,000,000 Operating costs excluding depr. & amort. 4,400,000 EBITDA $3,600,000 Depreciation & amortization 800,000 EBIT $2,800,000 Interest 600,000 EBT $2,200,000 Taxes (40%) 880,000 Net income $1,320,000 The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
Dividend Valuation
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Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
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It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
INCOME STATEMENT Hermann Industries is forecasting the following income statement:
| Sales | $8,000,000 |
| Operating costs excluding depr. & amort. | 4,400,000 |
| EBITDA | $3,600,000 |
| Depreciation & amortization | 800,000 |
| EBIT | $2,800,000 |
| Interest | 600,000 |
| EBT | $2,200,000 |
| Taxes (40%) | 880,000 |
| Net income | $1,320,000 |
The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
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