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    Austin Grocers projected net income and growth rate of dividends

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    Austin Grocers recently reported the following 2008 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

    This 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 2009 net income?
    b. What is the expected growth rate in Austin's dividends?

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    Solution Summary

    Austin Grocers projected net income and growth rate of dividends are examined.

    $2.19

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