Problem:
Consider the following income statement for the Heir Jordan Corporation:
HEIR JORDAN CORPORATION
Income Statement
Sales $43,800
Costs 34,800
Taxable income $9,000
Taxes (35%) 3,150
Net income $5,850
Dividends $3,300
Addition to retained earnings 2,550
The projected sales growth rate is 12 percent.
Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant.
HEIR JORDAN CORPORATION
Pro Forma Income Statement
Sales $
Costs
Taxable income $
Taxes
Net income $
What is the projected addition to retained earnings?
Retained earnings $