Pro forma income statementAustin Grocers recently reported the following 2016 income statement (in millions of dollars):Sales $700Operating costs including depreciation 500EBIT $200Interest 40EBT $160Taxes (40%) 64Net income $96Dividends $32Addition to retained earnings $64For the coming year, the company is forecasting a 20% increase in sales, and it expects that its year-end operating costs, including depreciation, will equal 75% of sales. Austin's tax rate, interest expense, and dividend payout ratio are all expected to remain constant. What is Austin's projected 2017 net income? Enter your answer in millions. For example, an answer of $13,000,000 should be entered as 13. Round your answer to two decimal places.$ millionWhat is the expected growth rate in Austin's dividends? Do not round your intermediate calculations. Round your answer to two decimal places.%

$102 million and 6.25%

Explanation:

The computation is shown below:

a. For net income

As we know that

Net income = (Earning before interest and taxes - interest) × (1 - tax rate)

where,

EBIT is calculated after finding out the sales, operating cost which is given below:

Sales = $700 million  × 1.20  = $840 million

And, the operating costs = 75% × $840 million = $630 million

So, the EBIT is

= $840 million - $630 million

= $210 million

Now the net income is

= ($210 million - $40 million) × (1 - 40%)

= $102 million

2.  Now expected growth rate in net income is

= (Latest year Net income ÷ previous year net income) - 1

= ($102 million ÷ $96 million) -1

= 6.25%

Since dividend payout ratio is same so the growth rate in dividend should be equal to the growth rate in net income i.e 6.25%

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