Use the Table below to answer QUESTION # 1( A, B and C)

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Question description

Use the Table below to answer QUESTION # 1( a, b and c).

Global Conglomerate Corporation

Income Statement

Year Ended December 31 (in $ millions)

_______________________   _                      2012___   _2011

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


QUESTION #1: Suppose that in 2013, Global Conglomerate Corporation (Global) launches an aggressive marketing campaign that boosts sales by 20%. 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 2012.

a.  What is Global’s EBIT in 2013?

Global’s EBIT in 2013 is $___ million. (Round to two decimal places.)

b.  What is Global’s income in 2013?

  Global’s net income in 2013 is $___ million. (Round to two decimal places.)

c.  If Global’s P/E ratio and number of shares outstanding remains unchanged, what is Global’s share price in 2010?

  Global’s share price is $____. (Round to the nearest cent.)


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