Assume the profit margin is projected to increase to 9 percent while the dividend payout ratio remains constant. If sales increase by 12 percent, what is the projected total retained earnings (hint: add the additional RE onto the current RE) ? Currently, the firm's sales = $4,700, net income is $420, total assets=7890, dividends=125, A/P = 790, LTD = 3130, and common stock=2780, and retained earnings = 1190.

Question

Jesse Snow

Business

30 October, 10:27

Assume the profit margin is projected to increase to 9 percent while the dividend payout ratio remains constant. If sales increase by 12 percent, what is the projected total retained earnings (hint: add the additional RE onto the current RE) ? Currently, the firm's sales = $4,700, net income is $420, total assets=7890, dividends=125, A/P = 790, LTD = 3130, and common stock=2780, and retained earnings = 1190.

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Answers (1)

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Elianna Werner · Answer 1

The projected retained earnings are $1538.76

Explanation:

Profit margin=net income/sales

profit margin is 9%

sales growth rate is 12%

9%=net income / ($4,700 * (1+12%))

9%=net income/5264

9%*5264=net income

net income=$473.76

Projected total retained earnings=$1190+$473.76-$125=$1538.76