experience as an equities analyst

Jenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.

During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data.

Computron’s Income Statement
Net sales$3,432,000$5,834,400
Cost of Goods Sold Except Depr.$2,864,000$4,980,000
Depreciation and amortization$18,900$116,960
Other Operating Expenses$340,000$720,000
Total Operating Costs$3,222,900$5,816,960
Earnings before interest and taxes (EBIT)$209,100$17,440
Less interest$62,500$176,000
Pre-tax earnings$146,600-$158,560
Taxes (40%)$58,640-$63,424
Net Income$87,960-$95,136
Tax rate40%40%

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