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Use the below information to answer the following question. Income Statement For the Year Sales $42,700 Cost of goods sold 29,250 Depreciation 3,750 Earnings before

Use the below information to answer the following question.

Income Statement
For the Year
Sales $42,700
Cost of goods sold 29,250
Depreciation 3,750
Earnings before interest and taxes $ 9,700
Interest paid 1,360
Taxable income $ 8,340
Taxes 2,840
Net income $ 5,500
Dividends $1,925

Balance Sheet
End-of-Year
Cash $1,320
Accounts receivable 3,780
Inventory 10,200
Total current assets $15,300
Net fixed assets 33,600
Total assets $48,900
Accounts payable $ 3,650
Long-term debt 18,100
Common stock ($1 par value) 15,000
Retained earnings 12,150
Total Liab. & Equity $48,900

The profit margin, the debt-equity ratio, and the dividend payout ratio for this firm are constant. Sales are expected to increase by $5,000 next year. What is the projected addition to retained earnings for next year?

A. $3,575
B. $1,909
C. $2,386
D. $3,994
E. $1,885

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