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9 December, 10:01

The Cookie Shoppe expects sales of $437,500 next year. The profit margin is 4.8 percent and the firm has a 30 percent dividend payout ratio. What is the projected increase in retained earnings? a. $16,231

b. $17,500

c. $18,300

d. $20,600

e. $21,000

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  1. 9 December, 10:17
    0
    Projected Increase in Retained Earnings = $16231.25

    so correct option is a. $16231

    Explanation:

    given data

    sales = $437,500

    profit margin = 4.8 percent

    dividend payout ratio = 30 %

    to find out

    projected increase in retained earnings

    solution

    we get here first Expected Profit that is express as

    expected Profit = Sales * Profit Margin ... 1

    expected Profit = 437500 * 5.3%

    expected Profit = $23187.50

    and Dividends is here as

    Dividends = Expected Profit * Dividend Payout Ratio ... 2

    Dividends = 23187.50 * 30%

    Dividends = $6956.25

    Projected Increase in Retained Earnings will be

    Projected Increase in Retained Earnings = expected Profit - Dividends ... 3

    Projected Increase in Retained Earnings = $23187.50 - $6956.25

    Projected Increase in Retained Earnings = $16231.25

    so correct option is a. $16231
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