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Suppose that in 2016, Global launches an aggressive marketing campaign that boosts sales by 16%. However, their operating margin falls from 5.57% to 4.9%. Suppose

Suppose that in 2016, Global launches an aggressive marketing campaign that boosts sales by 16%. However, their operating margin falls from 5.57% to 4.9%. Suppose that they have no other income, interest expenses are unchanged, and taxes are the same percentage of pretax income as in 2015. (See Table LOADING... .) a. What is Global's EBIT in 2016? b. What is Global's income in 2016? c. If Global's P/E ratio (25.2) and number of shares outstanding (3.6 million) remains unchanged, what is Global's share price in 2016?

GLOBAL CONGLOMERATE CORPORATION

Income Statement

Year Ended December 31 (in $ millions)

2015

2014

Total sales

186.70

176.10

Cost of sales

(153.40)

(147.30)

Gross Profit

33.30

28.80

Selling, general, and administrative expenses

(13.50)

(13.00)

Research and development

(8.20)

(7.60)

Depreciation and amortization

(1.20)

(1.10)

Operating Income

10.40

7.10

Other income

Earnings before interest and taxes (EBIT)

10.40

7.10

Interest income (expense)

(7.70)

(4.60)

Pretax income

2.70

2.50

Taxes

(0.70)

(0.60)

Net Income

2.00

1.90

Earnings per share:

$0.556

$0.528

Diluted earnings per share:

$0.526

$0.500

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