Question

Husqvarna launched in 2016 an aggressive marketing campaign that boosted sales by 16%. However, their operating margin fell from 5.57% to 4.3%. Suppose that Husqvarna had no other income, interest expenses were unchanged from 2015, and taxes were the same percentage of pretax income as in year 2015.

Husqvarna Corporation Income Statement ($ million) Husqvarna Corporation Consolidated Balan ce Sheet ($ million) Year Ended December 31 For the year ended December 31 2015 2014 2014 Liabilities and Stockholders' Equity Current liabilities 19,5 Accounts payable 13,2 Notes payable's hort-term debt Total Sales Cost of Sales Gross Profit Selling, general, and administrative expense Research and development Depreciation and amortization Operating Income Other income Assets Current Assets Cash Accounts Inventori Other Cu Total Cur 2014 186.7 2015 2015 176.1 -153,4 33.3 -147,3 21,2 29,2 24.5 28,8 3.1 18.5 3.5 -13.5 13 14,3 Current maturities of long-term debt 1Other current liabilities 15,3 13,3 12.3 -8,2 7,6 1,1 2 2 4 1,2 48 48 Total current liabilities 57 44 10,4 7. 0 Long-Term Assets Land Buildings Equipmen Less Accu Net Prope Goodwill Other Lon Total long Earnings before interest and taxes (EBIT) Interest income (expense) Pretax income Taxes Net Income Long-Term Liabilities 10,4 7,1 20,7 Long-term debt 30,5 Capital lease obligations 33,2 Total debt -17,5 Deferred taxes 66,9 Other long-term liabilities 22,2 99,9 76,3 -7.7 4.0 36,5 0 2,7 2. 39,7 99,9 76,3 -0,7 0.4 2 1, -18,7 7,6 7.4 Earnings per share Diluted earnings per share 79,7 $0,56 S0,53 S0.50 20 20 Total long-term liabilities 14 Total Liabilities 107.5 83.7 S0.53 21 155.5 127,7 100,9 Stockhoders' Equity 120,7 22.2 21,2 Total asse 177,7 148,9 Total Liabilities and Stockholders' Equity 177.7 148.9

(a) What was Husqvarna’s EBIT in 2016?

EBIT in 2016 was _______$ million. (round to 2 decimals)

(b) What was Husqvarna’s net income in 2016?

Income in 2016 was ________$ million. (round to 2 decimals)

(c) Husqvarna’s P/E ratio in 2015 was 25.2. Suppose that in year 2016 P/E ratio and number of shares outstanding remained unchanged from 2015, what was Husqvarna’s share price in 2016?

Share price in 2016 was________ $ . (round to 2 decimals)

Answer 1

Answer: (a) Revenues in 2016 = 1.16 × 186.7 = $216.572 million.

EBIT = 4.30% × 216.572 = $9.31 million (there is no other income)

Answer: (b) Net Income = EBIT – Interest Expenses – Taxes

= (9.31 – 7.7) × (1 – 26%) = $1.19 million.

Answer:c Share price = (P/E Ratio in 2015) x (EPS in 2016) = 25.2 x (1.19/3.57) = $8.40