Determine forecasted addition to retained earnings

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Reference no: EM1364533

Kenney Corporation reported the following income statement for the most recent year(numbers are in millions of dollars):

Sales $7,000
Total operating costs 3,000
EBIT $4,000
Interest 200
Earnings before tax (EBT) $3,800
Taxes (40%) 1,520
Net income available to
common shareholders $2,280

The company forecasts that its sales will increase by 10 percent in the next year and its operating costs will increase in proportion to sales. The company's interest expense is expected to remain at $200 million, and the tax rate will remain at 40 percent. The company plans to pay out 50 percent of its net income as dividends, the other 50 percent will be additions to retained earnings. What is the forecasted addition to retained earnings for the next year?

Reference no: EM1364533

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