Evaluating the expected growth rate in dividends


Austin Grocers recently reported the following 2008 income statement (in millions of dollars): Sales $700 Operate ring cost including depreciation 500 EBIT 200 Interest 40 EBT $160 Taxes (40%) 64 Net Income $ 96 Dividends 32 Additional to retained earning $ 64 This year the company is forecasting a 25% increase in sales; and it expects that its year-end operating cost, 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 2009 net income? b. What is the expected growth rate in Austin's dividends?

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Finance Basics: Evaluating the expected growth rate in dividends
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