Determine the forecasted addition to retained earnings

Reference no: EM1352471

L. corporation recently reported the following income statement for 2004 (numbers are in millions of dollars):
Sales $ 12,500
total operating costs 5,700
EBIT 6,800
Interest 150
Earnings before tax EBT 6,650
Taxes 40% 2660
Net Income available to common shareholders $3990

The company forecasts that its sales will increase by 8% in 2005 and its operating costs will increase in proportion to sales. The company's interest expense is expected to remain at $150 million, and the tax rate will remain at 40%. The company plans to pay out 70 % of its net income as dividends, the other 30% will be additions to retained earnings. What is the forecasted addition to retained earnings for 2005?

Reference no: EM1352471

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