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 addition earnings he can expect to retain and reinvest in the firm. The firms income statement for 2015 follows:

Income Statement

Sales $1,600,000

Cost of Goods Sold $960,000

Gross Profit $640,000

Operating Costs $256,000

Depreciation Expense $46,000

Net operating profit $338,000

Interest Expense $10,000

Earning before Taxes $328,000

Taxes $114,800

Net income $213,200

Dividends $28,000

Addition to Retained Earnings $185,200

The electronics business has been growing rapidly over the past 18 months as the economy recovers, and the CFO estimate the sales will expand by 16 percent in the next year. In Addition, he estimates the following relationship between each of the income statement expense items and sales

COGS/Sales 60%

Operating expenses/sales 16%

Depreciation expense $46,000

Interest Expense $10,000

Tax Rate 35%

Note that for the coming year both depreciation expense and interest expense are projected to remain the same in 2015.

A) Estimate Barkers net income for 2016 and its addition to retained earning under the assumption that the firm leaves its dividends paid at the 2015 level.

B) Reevaluate Barkers 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 $100,000 which increases annual depreciation to %52,000 per year, and interest expense rise to $14,000.