Suppose that in

2019,

Global launches an aggressive marketing campaign that boosts sales by

16%.

However, their operating margin falls from

5.57%

to

4.7%.

Suppose that they have no other income, interest expenses are unchanged, and taxes are the same percentage of pretax income as in

2018.

(See Table 2.2

LOADING...

.)

a. What is Global's EBIT in

2019?

b. What is Global's income in

2019?

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

2019?

GLOBAL CONGLOMERATE CORPORATION

Income Statement

Year Ended December 31 (in $ millions)

2018

2017

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