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You have recently been hired as a Finance Manager by FishKing Corp, a major multination corporation, after graduating from Yorkville University with a BBA. You
You have recently been hired as a Finance Manager by FishKing Corp, a major multination corporation, after graduating from Yorkville University with a BBA. You got this job as a result of being a very ethical student who never cheated on any mid term exam.
The following is the most recent Statement of Comprehensive Income for FishKing Corp.
Sales $47,000
Cost of Goods 31,300
Taxable Income 15,700
Taxes 5,495
Net Income $10,205
Dividends $2,500
Retained Earnings 7,705
The CFO asks you to put together a pro forma statement of comprehensive income for next year projecting a 15% increase in sales. The CFO instructs you to assume that costs will vary with sales and that the dividend payout ratio will remain constant.
(i) What is the projected addition to retained earnings? Show all your work by completing a proforma Statement of Comprehensive Income.
(ii) If the CFO wants to have $8,000 in addition to Retained Earnings next year, what should the Dividend Payout Ratio be?
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