Consider the following scenario: Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.

1. Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT).
2. The company’s operating costs (excluding depreciation and amortization) remain at 70.00% of net sales, and its depreciation and amortization expenses remain constant from year to year.
3. The company’s tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT).
4. In Year 2, Cold Goose expects to pay $300,000 and $2,306,475 of preferred and common stock dividends, respectively.

Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Round each dollar value to the nearest whole dollar.

Cold Goose Metal Works Inc. Income Statement for Year Ending December 31

Year 1 Year 2 (Forecasted)
Net sales $30,000,000 $
Less: Operating costs, except depreciation and amortization 21,000,000
Less: Depreciation and amortization expenses 1,200,000 1,200,000
Operating income (or EBIT) $7,800,000 $
Less: Interest expense 780,000
Pre-tax income (or EBT) 7,020,000
Less: Taxes (40%) 2,808,000
Earnings after taxes $4,212,000 $
Less: Preferred stock dividends 200,000
Earnings available to common shareholders 4,012,000
Less: Common stock dividends 1,263,600
Contribution to retained earnings $2,748,400 $3,387,850

answer; be sure that the information on file is correct;

answer; decentralized;

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.