Raj Ltd recently reported the following income Statement: Particulars in Cr. Sales 700 Operating Cost 500 EBIT 200 Interest 40 PBT 160 Taxes @40% 64 PAT (Net Income) 96 Dividend 32 Retained Earnings 64 This year company

CS Executive · Corporate Accounting and Financial Management · PYQS · June 2026
Raj Ltd recently reported the following income Statement: Particulars in Cr. Sales 700 Operating Cost 500 EBIT 200 Interest 40 PBT 160 Taxes @40% 64 PAT (Net Income) 96 Dividend 32 Retained Earnings 64 This year company is forecasting 25% increase in sales and it expects that its year end operating cost will be around 70% of sales. It is expected that tax rate, interest and dividend pay-out ratio will be constant. You are required to compute projected Net Income and expected growth rate in dividend.

Answer & Explanation:

Answer 3(b) Statement showing Projected Profit & Loss Particulars Amount (in Cr.) Sales (700+25%) 875 Less: Operating Cost (70% of 875) 612.5 Earnings before Interest and Tax (EBIT) 262.5 Less: Interest 40 Profits before Tax (PBT) 222.5 Less: Tax @40% 89 Profits after Tax PAT 133.5 Dividend (33.33% * 133.5) 44.50 Note: 1 Dividend Pay-out Ratio (Existing Year) = [Dividend/Net Income] * 100 = [₹32/₹96] * 100 = 33.33% Note: 2 Expected Growth in Dividend = [(₹44.5 - ₹32)/₹32] * 100 = 39.06%

Topics: Financial Management

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