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