8. In the year just ended, Callaway Lighting had sales of $5,000,000 and incurred a cost of goods sold equal to $4,500,000. The firm's operating expenses were $130,000, and its increase in retained earnings was $40,000 for the year. There are currently 100,000 ordinary shares outstanding, and the firm pays a $1.63 dividend per share. The firm has $1,000,000 in interest-bearing debt on which it pays 8% interest.

a) Assuming the firm's earnings are taxed at 30%, construct the firm's income statement. b) Calculate the firm's operating profit margin and net profit margin. c) Compute the interest coverage ratio. What does this ratio tell you about Callaway's ability to pay its interest expense?

8. In the year just ended, Callaway Lighting had sales of $5,000,000 and incurred a cost of goods sold equal to $4,500,000. The firm's operating expenses were $130,000, and its increase in retained earnings was $40,000 for the year. There are currently 100,000 ordinary shares outstanding, and the firm pays a $1.63 dividend per share. The firm has $1,000,000 in interest-bearing debt on which it pays 8% interest. a) Assuming the firm's earnings are taxed at 30%, construct the