For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant.Required:What is the projected 2017 net income? Reima Inc. 2016 income statement is presented below.SalesP3,500,000Operating Costs2,500,000Earnings before interest and taxesP1,000,000Interest expense200,000Earnings before taxesP800,000Income tax (40%)320,000Net IncomeP480,000Dividends (40%)Addition to retained earningsP192,000P288,000

A 40% increase in sales : = P3,500,000 + (P3,500,000 × 40% )= P3,500,000 + P1,400,000= P4,900,000…

For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant. Required: What is the projected 2017 net income?

For 2017, the firm is forecasting a 40% increase in sales and that its year end operating costs will decline to 60% of sales. Tax rate, interest expense and dividend payout ratio are expected to remain constant. Required: What is the projected 2017 net income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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