6-4. PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2015 income statement (in millions of dollars): $700 $500 $200 40 Sales Operating costs including depreciation ЕBIT Interest EBT Тахes (40%) Net income $160 64 Dividends Addition to retained earnings $ 96 $32 $ 64 For the coming year, the company is forecasting a 25% increase in sales, and it expects that its year- end operating costs, including depreciation, will equal 70% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant. a. What is Austin's projected 2016 net income? b. What is the expected growth rate in Austin's dividends?
6-4. PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2015 income statement (in millions of dollars): $700 $500 $200 40 Sales Operating costs including depreciation ЕBIT Interest EBT Тахes (40%) Net income $160 64 Dividends Addition to retained earnings $ 96 $32 $ 64 For the coming year, the company is forecasting a 25% increase in sales, and it expects that its year- end operating costs, including depreciation, will equal 70% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant. a. What is Austin's projected 2016 net income? b. What is the expected growth rate in Austin's dividends?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:6-4. PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2015
income statement (in millions of dollars):
$ 700
$500
$200
40
Sales
Operating costs including depreciation
ЕBIT
Interest
$160
64
EBT
Taxes (40%)
Net income
$96
$ 32
$ 64
Dividends
Addition to retained earnings
For the coming year, the company is forecasting a 25% increase in sales, and it expects that its year-
end operating costs, including depreciation, will equal 70% of sales. Austin's tax rate, interest
expense, and dividend payout ratio are all expected to remain constant.
a. What is Austin's projected 2016 net income?
b. What is the expected growth rate in Austin's dividends?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education