Yash Ltd. recently reported the following income Statement : Particulars (₹ in Crores) Sales 600 Operating Cost 470 EBIT 130 Interest 40 EBT 90 Taxes @ 40% 36 EAT (Net Income) 54 Dividend 21.6 Retained Earnings 32.4 This

CS Executive · Corporate Accounting and Financial Management · PYQS · December 2025
Yash Ltd. recently reported the following income Statement : Particulars (₹ in Crores) Sales 600 Operating Cost 470 EBIT 130 Interest 40 EBT 90 Taxes @ 40% 36 EAT (Net Income) 54 Dividend 21.6 Retained Earnings 32.4 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. Calculate the following: (i) Projected Net Income (ii) Expected growth rate in dividend.

Answer & Explanation:

(i) Computation of Projected Net Income Particulars Amount (₹ in crore) Sales (₹ 600+25%) 750 Less: Operating cost (70% of ₹ 750) 525 EBIT 225 Less: Interest 40 EBT 185 Less: Tax @40% 74 EAT (Net Income) 111 Dividend (40%*111) 44.40 Retained Earnings 66.60 Note: 1 Dividend Pay-out Ratio (Existing Year) = [Dividend/Net Income] *100 = [₹ 21.6/₹ 54] *100 = 40% (ii) Expected Growth rate in Dividend = [(₹ 44.40 - ₹ 21.6) / ₹ 21.6] * 100 = 105.56%

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