Question

Khadimally, incorporated, expects sales of $763,500 next year. the net profit margin is 5.3 percent and the firm has a dividend payout ratio of 18 percent. what is the projected increase in retained earnings?

o a $33,181.71
o b. $7,283.79
o c. $26,294.75
o d $40.465.50
o e $137,430.00

Answer 1

To calculate the projected increase in retained earnings, multiply the sales by the net profit margin, calculate the dividends by multiplying the net profit by the dividend payout ratio, and then subtract the dividends from the net profit.

Step-by-step explanation:

To calculate the projected increase in retained earnings, we need to determine the net profit and the dividend payout.

Net profit = Sales * Net Profit Margin

Dividends = Net Profit * Dividend Payout Ratio

Retained Earnings = Net Profit - Dividends

Substituting the given values, we have:

Net Profit = $763,500 * 0.053 = $40,465.50

Dividends = $40,465.50 * 0.18 = $7,283.79

Projected Increase in Retained Earnings = $40,465.50 - $7,283.79 = $33,181.71

Therefore, the projected increase in retained earnings is $33,181.71 (Option A).