(Forecasting net income) In November of each year, the CFO of Barker Electronics begins the financial forecasting process to determine the firm's projocted needs for new financing during the coming year. Barker is a small eloctronics manufacturing company located in Moine, lllinois, 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 estiriates nat income and finally the additional earnings he can expect to retain and reirvest in the firm. The firm's income statement for 2015 follows: The electronics business has been growing rapidly over the past 18 months as the economy recovers, and the CFO ostimates that siles will expand by 16 percent in the next year. In addition, he estimales the following relationships between each of the income statement experrso iterns and sales: Note that for the coming year: both depreciation expense and interest expense are projected to romain the same as in 2015. a. Estimate Barker's net income for 2016 and its addition to retained eamings under the as sumption that the firm loaves its dividends pad at the 2015 level. b. Reovaluate Barker's net inoome and addifion to retained eamings if sales grow at 32 percent over the corning year. However, this scorario requires the addison of new plank and equipment in the amount of $110,000, which increases annual dopreciation to $58,000 per year, and interest expense rises lo $18,000. Sales Cost of goods sold Gross profit $1,500,000975,000$525,000 Operating costs Depreciation expense Nt operating profit Interest expense Earnings before taxes Taxes Net income Dividends \begin{tabular}{rr} & 210,000 \\ & 50,000 \\ \hline$ & 265,000 \\ & 12,000 \\ \hline$ & 253,000 \\ & 70,840 \\ \hline$ & 182,160 \\ \hline \hline$ & 24,000 \\ \hline \end{tabular} \begin{tabular}{lc} \hline COGS/sales & 65% \\ Operating expenses/sales & 14% \\ Depreciation expense & $50,000 \\ Interest expense & $12,000 \\ Tax rate & 28% \end{tabular}