Consider the following income statement for the Heir Jordan Corporation: The pro

Question

Consider the following income statement for the Heir Jordan Corporation:

The projected sales growth rate is 11 percent.

What is the projected addition to retained earnings (in $)? Assume costs vary with sales and the dividend payout ratio is constant.

(Omit the "$" sign and commas in your response. Enter your answer rounded to 2 decimal places. For example, $1,200.456 should be entered as 1200.46.)

Income Statement Sales $48859 Costs $35001 Taxable Income ? Taxes (35%) ? Net Income ? Dividends $1964

Explanation / Answer

Current dividend payout=Dividend/Net income

=(1964/9007.7)=0.21803568

Hence projected Addition to retained earnings=$7818.51(Approx).

Current Proposed Sales 48859 (48859*1.11)=$54233.49 Costs 35001 (35001*1.11)=$38851.11 Taxable income $13858 $15382.38 Taxes@35% $4850.3 $5383.833 Net income $9007.7 $9998.547

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