PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2016 i

Question

PRO FORMA INCOME STATEMENT

Austin Grocers recently reported the following 2016 income statement (in millions of dollars):

For the coming year, the company is forecasting a 15% 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.

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

Explanation / Answer

Dividend payout ratio=Dividends/Net income

=(32/96)=33.33%(Approx).

Sales(700*1.15) 805 Operating costs including depreciation(805*75%) 603.75 EBIT $201.25 Interest 40 EBT $161.25 Taxes@40% 64.50 Net income $96.75 million

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