Stork Freight Company owns and operates fifteen planes that deliver packages worldwide. The planes were purchased on January 1, 1993, for $1 million each. The company estimates that the planes will be scrapped after twelve years. Stork Freight uses straight-line depreciation. REQUIRED:

a. Assume that in a typical year the company generates revenues of $50 million and operat¬ ing expenses (excluding depreciation expense) of $25 million. Prepare an income state¬ ment for a typical year.

b. Assume that the company had originally estimated the useful life at six, instead of twelve, years. Prepare an income statement for a typical year. What is the percent change in net income?

c. Assume that the company policy is to pay dividends in the amount of 30 percent of net income. Compute the difference in the dividend payment between the two cases above.