Question
Suppose that in 2019, Global launches an aggressive marketing campaign that boosts sales by 15 %. However, their operating margin falls from 5.57 % to
Suppose that in 2019, Global launches an aggressive marketing campaign that boosts sales by 15 %. However, their operating margin falls from 5.57 % to 4.5 %. 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?
| Year Ended December 31 (in $ millions) | ||
| 2018 | 2017 | |
| Total sales | 186.7 | 176.1 |
| Cost of sales | (153.40) | (147.30) |
| Gross Profit | 33.3 | 28.8 |
| 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 | 10.4 | 7.1 |
| Other income | long dash | long dash |
| Earnings before interest and taxes (EBIT) | 10.4 | 7.1 |
| Interest income (expense) | (7.70) | (4.60) |
| Pretax income | 2.7 | 2.5 |
| Taxes | (0.70) | (0.60) |
| Net Income | 2 | 1.9 |
| Earnings per share: | $0.556 | $0.528 |
| Diluted earnings per share: | $0.526 | $0.500 |
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