Next Year's Pro Forma Statement Is Based on an Annual

Multiple Choice

Next year's pro forma statement is based on an annual increase in sales of four percent. The firm is currently operating at 85 percent of capacity. Net working capital and all costs vary directly with sales. The tax rate and the dividend payout ratio are fixed. Given this information, the:

A) projected dividends must equal the current dividends.
B) depreciation expense will decrease by four percent.
C) retained earnings will increase by 85 percent of projected net income.
D) total assets will increase by less than four percent.
E) total liabilities and owners' equity will increase by four percent.