Austin Grocers recently reported the following 2005 income statement (in millions of dollars): 

This year the company is forecasting a 25 percent increase in sales, and it expects that its year-end operating costs including depreciation will equal 70 percent of sales. Austin’s tax rate, interest expense, and dividend payout ratio are all expected to remain constant.

a. What is Austin’s projected 2006 net income? 

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

Transcribed Image Text:

Sales Operating costs including depreciation EBIT Interest EBT Taxes (40%) Net income Dividends Addition to retained earnings $700 500 $200 40 $160 64 $96 $ 32 $ 64