$($Forecasting net income$)$ In November of each$$ year, the CFO of Barker Electronics begins the financial forecasting process to determine the$$ firm's projected needs for new financing during the coming year. Barker is a small electronics manufacturing company located in$$ Moline, Illinois, which is best known as the home of the John Deere Company. The CFO begins the process with the most recent$$ year's income$$ statement, projects sales growth for the coming$$ year, and then estimates net income and finally the additional earnings he can expect to retain and reinvest in the firm. The$$ firm's income statement for $2015$ follows: LOADING....

The electronics business has been growing rapidly over the past $18$ months as the economy$$ recovers, and the CFO estimates that sales will expand by $18$ percent in the next year. In$$ addition, he estimates the following relationships between each of the income statement expense items and$$ sales: LOADING.... Note that for the coming year both depreciation expense and interest expense are projected to remain the same as in $2015.$

a$.$ Estimate$$ Barker's net income for $2016$ and its addition to retained earnings under the assumption that the firm leaves its dividends paid at the $2015$ level.

b$.$ Reevaluate$$ Barker's net income and addition to retained earnings if sales grow at $36$ percent over the coming year.$$ However, this scenario requires the addition of new plant and equipment in the amount of $$$$110,000,$ which increases annual depreciation to $$$$54,000$ per year, and interest expense rises to $$16,000.$

COGS$/$Sales $65\%$

Operating Expenses$/$Sales $15\%$

Depreciation Expense $$48,000$

Interest Expense $$12,000$

Tax Rate $28\%$