eBook Calculator Problem 3-26 The Protek Company is a large manufacturer and distributor of electronic components. Because of some successful new products marketed to manufacturers of computers and mobile electronic devises, the firm has recently undergone a period of explosive growth, more than doubling its revenues during the last two years. However, the growth has been accompanied by a marked decline in profitability and a precipitous drop in the company's stock price. You are a financial consultant who has been retained to analyze the company's performance and find out what's going wrong. Your investigative plan involves conducting a series of in-depth interviews with management and doing some independent research on the industry. However, before starting, you want to focus your thinking to be sure you can ask the right questions. You'll begin by analyzing the firm's financial statements over the last three years, which are shown below. The following additional information is provided with the financial statements. Depreciation for 20X1, 20X2, and 20X3 was $200, $250, and $275 million respectively. No stock was sold or repurchased, and like many fast-growing companies, Protek paid no dividends. Assume the tax rate is a flat 34% and the firm pays 10 % interest on its debt. Protek Company Income Statements For the periods ended 12/31 ($000,000) 20X1 20X2 20X3 $ 1524 Sales $ 2090 $3231 631 COGS 906 1502 Gross margin $ 893 $1184 $1729 Expenses Marketing $ 316 $ 495 $ 882 R&D 158 211 327 Administration 126 179 294 Total expenses $ 600 $ 885 $1503 BIT 293 299 $ 226 Interest 63 95 143 T $ 230 $ 204 $ 83 Tax 78 69 28 EAT $ 152 135 $ 55 Protek Company Balance Sheets For the periods ended 12/31 Protek Company Balance Sheets For the periods ended 12/31 ($000,000) 20X3 20X2 20X1 ASSETS 62 $ 30 40 Cash 590 351 Accounts receivable 175 300 90 151 Inventory $ 295 Current assets 952 $ 542 Fixed assets Gross $ 1590 $2388 $ 2711 Accumulated depreciation (610) (860) (1135)