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Use the information given in the income statement to answer the question that follows.
| Cute Camel Woodcraft Company | | |
| Income Statement |
| Years Ending December 31 |
| | Year 2 (Forecasted) | Year 1 |
| Net sales | 18,750,000 | $15,000,000 |
| Fixed operating costs, except depreciation and amortization | (11,250,000) | (9,000,000) |
| Depreciation and amortization expenses | (600,000) | (600,000) |
| Net operating income (or EBIT) | 6,900,000 | $5,400,000 |
| Interest | (1,035,000) | (540,000) |
| Earnings before taxes (or EBT) | 5,865,000 | $4,860,000 |
| Taxes (40%) | (2,346,000) | (1,944,000) |
| Net Income | 3,519,000 | $2,916,000 |
| Preferred dividends | (200,000) | (200,000) |
| Earnings available to common stockholders (EAC) | 3,319,000 | $2,716,000 |
| Common dividends | (1,055,700) | (874,800) |
| Addition to retained earnings | $2,263,300 | $1,841,200 |
Cute Camels before interest, taxes, depreciation, and amortization (EBITDA) value changed from __________ in Year 1 to _______ in Year 2.
Options for year 1
$6,000,000
7,344,000
8,316,000
14,400,000
Options for year 2
$10,419,000
7,500,000
19,785,000
14,769,000
Answer & Explanation
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