Suppose that in 2019, Global launches an aggressive marketing campaign that boosts sales by 14%.

However, their operating margin falls from 5.57% to 4.8%.

Suppose that they have no other income, interest expenses are unchanged, and taxes are the same percentage of pretax income as in 2018.

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

2018 186.70

2017 176.10

Cost of sales

2018 (153.40)

2017 (147.30)

Gross Profit

2018 33.30

2017 28.80

Selling, general, and administrative expenses

2018 (13.50)

2017 (13.00)

Research and development

2018 (8.20)

2017 (7.60)

Depreciation and amortization

2018 (1.20)

2017 (1.10)

Operating Income

2018 10.40

2017 7.10

Other income

long dash

long dash

Earnings before interest and taxes (EBIT)

2018 10.40

2017 7.10

Interest income (expense)

2018 (7.70)

2017 (4.60)

Pretax income

2018 2.70

2017 2.50

Taxes

2018 (0.70)

2017 (0.60)

Net Income

2018 2.00

2017 1.90

Earnings per share:

2018 $0.556

2017 $0.528

Diluted earnings per share:

2018 $0.526

2017 $0.500