The Cookie Shoppe expects sales of 1,800 next year. The profit margin is 5 percent and the firm has a 37 percent dividend payout ratio. What is the projected increase in retained earnings? NOTE: In the EFN questions, once you know how much money is needed to based on the growth in assets, you then need to subtract off the projected internal equity (new retained earnings) that will be used in part to finance those assets.
20.98
33.30
90.00
69.02
56.70
57.
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To calculate the projected increase in retained earnings, we first need to determine the total dividend payout.
Total dividend payout = Sales * Profit margin * Dividend payout ratio
Total dividend payout = 1,800 * 0.05 * 0.37
Total dividend payout = 33.30
Next, we subtract the total dividend payout from the expected sales to find the projected increase in retained earnings.
Projected increase in retained earnings = Expected sales - Total dividend payout
Projected increase in retained earnings = 1,800 - 33.30
Projected increase in retained earnings = 1,766.70
Therefore, the projected increase in retained earnings is $1,766.70. Answer choice 57.
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