Euro Designs, Inc., expects sales during 2004 to rise from the 2003 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2004 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2004 to $320,000. The companys year-end 2003 income statement follows.

Euro Designs, Inc. Income Statement for the Year Ended December 31, 2003

Sales revenue $3,500,000

Less: Cost of goods sold 1,925,000

Gross profits $1,575,000

Less: Operating expenses 420,000

Operating profits $1,155,000

Less: Interest expense 400,000

Net profits before taxes$ 755,000

Less: Taxes (rate40%) 302,000

Net profits after taxes $ 453,000

Less: Cash dividends 250,000

To retained earnings $ 203,000