Ribbon Industries reported sales of $3 million and net income of $400,000 for 2010

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Ribbon Industries reported sales of $3 million and net income of $400,000 for 2010. The retained earnings balance at the end of 2012 is $7 million. Ribbon Industries has a dividend payout ratio of 30%. If sales are expected to increase by 25% next year, what will be the projected balance in retained earnings using the percent of sales method?
    a. $7,280,000
    b. $6,720,000
    c. $7,350,000
    d. $8,750,000