Hilton Corp. has revenues of $1,214,800, costs of $816,355, and pays a tax rate of 32 percent. If the firm pays out 50 percent of its earnings as dividends every year, what is the amount of retained earnings?

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The firm's earnings before taxes are calculated as revenues minus costs, which is $1,214,800 - $816,355 = $398,445. After applying the tax rate of 32 percent, the earnings after taxes are $398,445 * (1 - 0.32) = $271,142.60. Since the firm pays out 50 percent of its earnings as dividends, the retained earnings are 50 percent of $271,142.60, which is $135,571.30.