Austin Grocers recently reported the following 2012 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……………………………………………………………………$32 Addition to retained earnings………………………………………………$ 6 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. a. What is Austin’s projected 2013 net income? b. What is the expected growth rate in Austin’s dividends? Austin Grocers recently reported the following 2012 income statement in

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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Austin Grocers recently reported the following 2012 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………………………………………………$ 6

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.

a. What is Austin’s projected 2013 net income?

b. What is the expected growth rate in Austin’s dividends?

Austin Grocers recently reported the following 2012 income statement in

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