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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2018 income statement (in millions of dollars):

Sales $700
Operating costs including depreciation 500
EBIT $200
Interest 40
EBT $160
Taxes (40%) 64
Net income $ 94
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 2019 net income?
  2. b. What is the expected growth rate in Austin's dividends?

a.

Summary Introduction

To Determine: The net income of Company AG in 2019.

Introduction: A dividend is a corporate payment of assets or earnings to the investors. This payment can be made in two structures, through money or stock. The two appropriations have likenesses and are issued in the way.

Explanation

Determine the net income of Company AG in 2019

Using a excel spreadsheet the net income of Company AG in 2019 is determined as $133.50 million.

Excel Spreadsheet:

b.

Summary Introduction

To Determine: The expected growth rate of dividends of Company AG.

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