Austin Grocers recently reported the following 2018 income statement (in millions of dollars): Sales .............................................................................$700 Operating costs
Question:
Austin Grocers recently reported the following 2018 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 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 2019 net income?
b. What is the expected growth rate in Austin’s dividends?
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston