(Profitability and capital structure analysis) In the year just ended, Callaway Lighting had sales of $5,250,000 and incurred cost of goods sold equal to $4,500,000. The firm's operating expenses were $125,000 and its increase in retained earnings was $38,000 for the year. There are currently 103,000 common stock shares outstanding and the firm pays a $3.048 dividend per share. The firm has $1,100,000 in interest-bearing debt on which it pays 7.6 percent interest. a. Assuming the firm's earnings are taxed at 35 percent, construct the firm's income statement. b. Calculate the firm's operating profit margin and net profit margin. c. Compute the times interest earned ratio. What does this ratio tell you about Callaway's ability to pay its interest expense? d. What is the firm's return on equity? a. Assuming the firm's earnings are taxed at 35%, construct the firm's income statement. Complete the income statement below: (Round to the nearest dollar.) Income Statement Revenues $ Cost of Goods Sold Gross Profit $ $ Operating Expenses Net Operating Income Interest Expense Earnings before Taxes $ Income Taxes Net Income $ b. Calculate the firm's operating profit margin and net profit margin. The operating profit margin is%. (Round to one decimal place.) The net income margin is %. (Round to one decimal place.) c. Compute the times interest earned ratio. The times interest earned ratio is times. (Round to one decimal place.) What does this ratio tell you about Callaway's ability to pay its interest expense? (Select the best choice below.) O A. Callaway's operating income can fall as much as 7.5 times the interest expense and the company would still be able to service its debt. O B. Callaway's gross profit can fall as much as 7.5 times and still be able to service its debt. O c. Callaway's operating income can fall as much as 7.5 times and still be able to repay its debt. OD. Callaway's interest expense is 7.5 times higher than its competitors. d. What is the firm's return on equity? (Select the best choice below.) O A. There is not enough information to answer this question. OB. The firm's return on equity is the sum of the operating profit margin and the net profit margin, 18.6%. OC. The firm's return on equity is the same as the net profit margin, 6.7%. OD. The firm's return on equity is the same as the operating profit margin, 11.9%