Pro forma income statement

Austin Grocers recently reported the following 2016 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 20% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 75% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant.

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

What is the expected growth rate in Austin's dividends? Do not round your intermediate calculations. Round your answer to two decimal places.
%

Question

Answered

Answer :

millions

Sales $700 $840

Operating costs

including depreciation 500 630

EBIT $200 $210

Interest 40 40

EBT $160 $170

Taxes (40%) 64 68

Net income $96 $102

Dividends $32 $34

Addition to

retained earnings $64 $68

b) Sales for 2017 = $840 million ($700 x 1.2)

c) Operating costs for 2017 = $630 million ($840 x75%)

d) Taxes for 2017 = $68million ($170 x 40%)

e) Dividend payout ratio = Dividend/Net Income = 33.33%

f) Growth Rate in Dividends = Dividend Increase/Previous year's dividend x 100 = 6.25% (2/32 x 100)

anthougo anthougo · Answer 1 · 2025-03-29T06:22:06-04:00

Answer:

Austin Grocers

1. Projected 2017 Net Income

= $102 million

2. Expected Growth Rate in Dividends

= 6.25% (2/32 x 100)

Explanation:

a) Income statement (in millions of dollars):

2016 2017