Cute Camel Woodcraft Company's income statement reports data for its 1st year of operation. The Firm's CEO would like sales to increase by 25% next year. Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest & taxes (EBIT). The company's operating costs (excluding depreciation & amortization) remain at 65% of net sales, & its depreciation & amortization expenses remain constant from year to year. The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). In year 2, Cute Camel expects to pay $300,000 & $1,824,525 of preferred & common stock dividends, respectively.Complete the Year 2 income statement data & then answer the questions that follow. Year 1 Year 2 (Forecasted)Net Sales $20,000,000 Less: operating costs, except 13,000,000depreciation & amortization Less: depreciation & amortization expenses 800,000 800,000Operating Income (EBIT) $6,200,000 Less: interest expense 620,000 Pre-Tax Income (EBT) 5,580,000 Less: taxes (40%) 2,232,000 Earnings after taxes $3,348,000 Less: preferred stock dividends 300,000 Earnings available to common shareholders 3,048,000 Less: common stock dividends 1,506,600 Contribution to Retained Earnings $1,541,400 $1,929,975Given the results of the previous income statement calculations, complete the following statements:A. In year 2, if cute camel has 25,000 shares of preferred stock issued & outstanding, then each preferred share should expect to receive ($12, $30, $18 or $24) in annual dividends.B. If cute camel has 200,000 shares of common stock issued & outstanding, then the firm's earnings per share (EPS) is expected to change from ($31, $16.74, $27.90 or $15.24) in year 1 to ($33.79, $39.75, $18.77 or $20.27) in year 2.
