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Big Test Inc. had sales last year of $100mm. Sales are expected to grow 20% next year. To support the new sales level, the production

Big Test Inc. had sales last year of $100mm. Sales are expected to grow 20% next year. To support the new sales level, the production manager has indicated that fixed assets will need to increase by $30mm. Last year's balance sheet showed the following:

  • Current assets = $20mm
  • Fixed assets = $90mm
  • Accounts Payable = $10mm
  • Notes Payable = $20mm
  • Long-term Liabilities = $30mm
  • Common Stock = $20mm
  • Retained Earnings = $30mm

Assuming net margin will be 6% and that the retention ratio will be 25%, what is the forcast level of Retained Earnings for next year? (Note: use the standard assumptions from lecture)

  • $37.2mm
  • $31.8mm
  • $33.6mm
  • $34.8mm

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