What is the forecasted addition to retained earnings

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Problem - Kenney Corporation recently reported the following income statement for 2009 (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 $2,280

The company forecasts that its sales will increase by 10 percent in 2010 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 2010?

Reference no: EM133041142

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