In November of each year, the CFO of Barker Electronics begins the financial forecasting process to determine the firms projected needs for new financing during the coming years. 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, project sales growth for the coming year, and then estimates net income and finally additional earnings he can expect to retain and reinvest in the firm. The firms income statement for 2015 is the following:

Sales $1,600,000

Cost of Goods $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 retain earning $185,200

The electronics business has been growing rapidly over the past 18 moths 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 relationship 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 2015.

COGS/ Sales 60%

Operating expense/sale 16%

Depreciation Expense $46,000

Interest Expense $10,000

Tax Rate 35%

A) Estimate Barkers net income for 2016 and its addition retained earnings under the assumption that the firm leaves it 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 require the addition of new plant and equipment in the amount $100,000, which increases annual depreciation to %52,000 per year, and interest expense rise to $14,000