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Banner Company is a small publicly traded company. A recent analysis of its financial statements and stock price showed the following: \begin{tabular}{|l|r|} \hline Sales & $60,000,000 \\ \hline Net Income before Tax & $8,500,000 \\ \hline Average assets during the year & $20,000,000 \\ \hline Stock price as a multiple of earnings & 20 \\ \hline Corporate Income Tax Rate: & 21% \\ \hline Shares outstanding & 15,000,000 \\ \hline \end{tabular} Calculate the following \begin{tabular}{lcc} 1. Net profit margin before tax & 14.17 \\ \cline { 2 - 2 } 2. Net profit margin after tax & 11.19 \\ \hline 3. Return on assets & 33.58 \\ \hline 4. Earnings per share & $0.45 \\ \hline 5. Stock price & 8.95 \\ \hline \end{tabular} The current administration in Washington plans to increase corporate income tax from 21% to 35%. Calculate the revised items 1 through 5 if the corporate income tax is increased to 35%. Jose, through his 401K, has invested $500,000 of his retirement funds into Banner Stock. 6. How much of his retirement savings will he lose if the tax increase is passed? 7. Assuming the tax increase is passed, and Banner company does nothing to change its operations, what affect will it have on Banner's ability to invest in its business? Banner could maintain its after-tax profits by increasing revenues, cutting costs or a combination thereof. 8. What obstacles might prohibit Banner from increasing its prices (Name two)? 9. What could Banner do to decrease its costs (name two)? 10. If Banner's earnings per share decrease will its cost of capital increase or decrease

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