Question

In: Finance

Click here to read the eBook: Forecasted Financial Statements PRO FORMA INCOME STATEMENT Austin Grocers recently...

Click here to read the eBook: Forecasted Financial Statements

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 30% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 65% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant.

  1. 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

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

Solutions

Expert Solution

a: Net income = $167.1 million

c: Expected growth rate in dividend = (55.7-32)/32 = 74.06%

Workings

2016 income statement (in millions of dollars): Ratio 2017
Sales $700 $910
Operating costs including depreciation 500 $591.50
EBIT $200 $318.50
Interest 40 40
EBT $160 $278.50
Taxes (40%) 64 40% $111.40
Net income $96 $167.10
Dividends $32 33.33% $55.70
Addition to retained earnings $64 $111.40


Related Solutions

Click here to read the eBook: Forecasted Financial Statements PRO FORMA INCOME STATEMENT Austin Grocers recently...
Click here to read the eBook: Forecasted Financial Statements 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 35% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 65% of sales....
PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2016 income statement (in millions of...
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 15% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 65% of sales. Austin's tax rate, interest expense, and dividend payout ratio...
5.  Problem 7.09 Click here to read the eBook: Bond Yields Click here to read the eBook:...
5.  Problem 7.09 Click here to read the eBook: Bond Yields Click here to read the eBook: Bonds with Semiannual Coupons YIELD TO MATURITY Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%. What is the yield to maturity at a current market price of $836? Round your answer to two decimal places.    % $1,070? Round your answer to two decimal places.    %...
Click here to read the eBook: The Cost of Retained Earnings, rs Click here to read...
Click here to read the eBook: The Cost of Retained Earnings, rs Click here to read the eBook: Composite, or Weighted Average, Cost of Capital, WACC WACC Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 30% debt and 70% common equity. Its last dividend (D0) was $2.95, its expected constant growth rate...
Chapter 4: 3. Fire Corp financial statements: Pro forma income statement Pro forma balance sheet Sales...
Chapter 4: 3. Fire Corp financial statements: Pro forma income statement Pro forma balance sheet Sales $      32,000 Assets $25,300 Debt $        5,800 Costs $        24,400 ________ Equity $        19,500 Net income $        7,600 Total $25,300 Total $      25,300 It expects 15% sales increase. It also predicts every item on the balance sheet will increase by 15% as well. 1.Create the pro forma statements. 2. What’s the plug variable here? 3. If Fire Corp pays half of income as dividend,...
Which of the following budgeted pro forma financial statements is prepared first? A. Pro forma statement...
Which of the following budgeted pro forma financial statements is prepared first? A. Pro forma statement of cash flows B. Pro forma income statement C .Pro forma balance sheet D. May be prepared in any order explain why please
FORECASTING FINANCIAL STATEMENTS - Below is a pro-forma income statement and balance sheet for Company A...
FORECASTING FINANCIAL STATEMENTS - Below is a pro-forma income statement and balance sheet for Company A for a 5-year period and a terminal year, based on various assumptions, which already have been completed. Company A Income Statement For the Years Ended 2017 2018 2019 2020 2021 2022 Terminal year 2023 Sales     550.00            825.00               990.00                  1,138.50                    1,252.35                    1,340.01                        1,393.62                 1.50 (825*120%) (990*115%) (1138.50*110%) (1252.35*107%) (1340.01*104%) Cost of Sales     275.00            288.75              ...
1.  Problem 11.07 Click here to read the eBook: Net Present Value (NPV) Click here to read...
1.  Problem 11.07 Click here to read the eBook: Net Present Value (NPV) Click here to read the eBook: Internal Rate of Return (IRR) Click here to read the eBook: Modified Internal Rate of Return (MIRR) Click here to read the eBook: Payback Period CAPITAL BUDGETING CRITERIA A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project M -$12,000 $4,000 $4,000...
Click here to read the eBook: Business and Financial Risk FINANCIAL LEVERAGE EFFECTS The Neal Company...
Click here to read the eBook: Business and Financial Risk FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $15 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.2 million with a...
Austin Grocers recently reported the following 2016 income statement (in millions of dollars): Sales $700 Operating...
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 15% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 60% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT