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