Question

PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2016 income statement in millions of dollars): $700 Sales Operating costs including depreciation 500 EBIT $200 Interest 40 EBT $160 Taxes (40%) 64 Net income $96 Dividends $32 $64 Addition to retained earnings For the coming year, the company is forecasting a 35% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 60% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant. a. What is Austin's projected 2017 net income? Enter your answer in millions. For example, an answer of $13,000,000 should be entered as 13. Round your answer to two decimal places. million b. What is the expected growth rate in Austin's dividends? Do not round your intermediate calculations. Round your answer to two decimal places.

Answer 1

solutions a. Austin's projected 2017 net Income = $202.8 millions b. Expected Growth rate in Austin's Dividends : 111.21.1. Explanation: Austin's Grocers Income statement For the year ended 2017 Amount in Dollar (sin millions) sales ($700 millions x 135:1) $945 Less: Operating GOSE including . $(567) ... Depreciation ($945 millions & 60%) Earnings Before Interest & Taxes (EBIT) $378 Less: Interest $(no) Earnings Before Taxes (EBT) $$ 338 Less: Tasces ($338 millions & nol) $(135.2) Net Income $202.8 b) Dividend payout ratio . (in the year 2016) : . Dividend too Net Income $32 $96X100 = 33.331. Dividend payout Ratio is same for year 2017 ... Dividend for 2017 = Net Income x 33.337. $202.8+33.334). =$67.59. Hence Growth in dividend = Sol.54-532 - 4100 $32 - 111.21),

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