The following data were extracted from the 2008 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States and the United Kingdom. The company had 315 dealerships as of the end of 2008. Due to the general recession, automobile sales worldwide were down in 2008 from 2007, and the data for Penske reflects this downturn. By comparison, from 2006 to 2007 Penske's revenues and net income increased by \(15 \%\) and \(2.4 \%\), respectively.

Required

a. Compute Penske's gross margin percentage for 2008 and 2007.

b. Compute Penske's average days to sell inventory for 2008 and 2007.

c. How much higher or lower would Penske's earnings before taxes have been in 2008 if its gross margin percentage had been the same as it was in 2007? Show all supporting computations.

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2008 2007 Revenue from car sales $8,794,738 $10,157,216 Cost of sales-cars 8,093,615 9,315,115 Gross profit-car sales 701,123 842,101 Operating income before taxes (502,512) 197,080 Net income (loss) (411,901) 127,739 Ending inventory 1,593,267 1,688,286