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PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2015 income statement (in millions of dollars): Sales $700 Operating costs including depreciation 500 EBIT $200 Interest 40 EBT $160 Taxes (40%) 64 Net income $ 96 Dividends $ 32 Addition to retained earnings $ 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?

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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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Chapter
Section
Chapter 17, Problem 4P
Textbook Problem

PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2015 income statement (in millions of dollars):

Sales $700
Operating costs including depreciation 500
EBIT $200
Interest 40
EBT $160
Taxes (40%) 64
Net income $ 96
Dividends $ 32
Addition to retained earnings $ 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.

  1. a. What is Austin’s projected 2016 net income?
  2. b. What is the expected growth rate in Austin’s dividends?

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