: $($Analyzing profitability and capital structure$)$ In the year just ended, Callaway Lighting had sales of $$5,000,000$ and incurred a cost of goods sold of $$4,500,000.$ The firm$$s operating expenses were $$130,000,$ and its increase in retained earnings was $$40,000$ for the year. There are currently $100,000$ common$-$stock shares outstanding, and the firm pays a $$1\mathrm{.}485$ dividend per share. The firm has $$1,000,000$ in interest$-$ bearing debt, on which it pays $8$ percent interest.

A$.$ Assuming the firm$$s earnings are taxed at $35$ percent, construct the firm$$s income statement.

B$.$ Calculate the firm$$s operating profit margin and net profit margin.

C$.$ Compute the times interest earned ratio. What does this ratio tell you about Callaway$$s ability to pay its interest expense?

D$.$ What is the firm$$s return on equity?