I need help figuring out part B PLEASE!! The Firms Income statement from 2018 is below and the expenses table right after. I also included my answer from part a to follow. I just dont know what I am doing wrong why I am not getting the right answer for part b. THANKS!!
(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 2018 follows: B. 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 16 percent in the next year. In addition, he estimates the following relationships between each of the income statement expense items and sales: Note that for the coming year both depreciation expense and interest expense are projected to remain the same as in 2018. a. Estimate Barker's net income for 2019 and its addition to retained earnings under the assumption that the firm leaves its dividends paid at the 2018 level. b. Reevaluate Barker's net income and addition to retained earnings if sales grow at 32 percent over the coming year. However, this scenario requires the addition of new plant and equipment in the amount of $90,000, which increases annual depreciation to $51,000 per year, and interest expense rises to $15,000. a. What is the estimate of Barker's net income for 2019? $ 180740 (Round to the nearest dollar.) Assuming the firm leaves its dividends paid at the 2018 level, what is the estimate of Barker's addition to retained earnings for 2019? $ 150740 (Round to the nearest dollar.) b. If sales grow at 32 percent over the coming year, annual depreciation increases to $51,000 per year, and interest expense rises to $15,000, what is the estimate of Barker's net income for 2019? 243600 (Round to the nearest dollar.) Sales Cost of goods sold Gross profit Operating costs Depreciation expense Net operating profit Interest expense Earnings before taxes Taxes Net income Dividends Addition to retained earnings 1500000 1050000 450000 180000 44000 226000 11000 215000 64500 150500 30000 120500 Data table (Click on the following icon in order to copy its contents into a spreadsheet.) COGS/sales Operating expenses/sales Depreciation expense Interest expense Tax rate 70% 12% $ 44,000 $ 11,000 30% Data table (Click on the following icon in order to copy its contents into a spreadsheet.) COGS/sales Operating expenses/sales Depreciation expense Interest expense Tax rate 70% 12% $ 44,000 $ 11,000 30% Income Statement 1740000 sales 1500000 X (1+0.16) 1218000 COGS 1740000 X 0.70 208800 operating costs 44000 depreciation expense 1740000 X 0.12 Sales Cost of goods sold Gross profit Operating costs Depreciation expense Net operating profit Interest expense Earnings before taxes Taxes Net income Dividends Addition to retained earr 1,200,000 816,000 384,000 216,000 45,000 123,000 13,000 110,000 41,800 68,200 25,000 43,200 Income Statement Sales 1740000 Cost of goods sold 1218000 = Gross profit 522000 Operating costs 208800 Depreciation expense 44000 - Net operating profit 269200 Interest expense 11000 Earnings before taxe 258200 Taxes 77460 Net income 180740 dividends 30000 retained earnings 150740
