Innovative Inc is experiencing a boom for the products it has introduced recently. The estimated annual sales projected for the next five years are given in the following table. The current capacity is equivalent to only $100 million sales
The company is considering the alternative of expanding capacity to an equivalent of $250 million sales. Assume a 25 percent pretax profit margin. What is the increase in total pretax cash flow (summed over all years) that would be enjoyed because of the expansion?
Year Annual Sales
(in $ million)
1 100
2 140
3 170
4 200
5 250
A) less than or equal to $40 million
B) more than $40 million but less than or equal to $70 million
C) more than $70 million but less than or equal to $100 million
D) more than $100 million
C
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Kim Corporation is considering an investment of 750 million won with expected after-tax cash inflows of 175 million won per year for seven years. The required rate of return is 10 percent. What is the project's:
A. 102 million won 14.0% B. 157 million won 23.3% C. 193 million won 10.0%
John buys a watch for $100 at a vintage store. Later, the store learns that the watch was worn by Sean Connery in a James Bond movie and wishes to rescind the sales contract they have with John
Which of the following statements is true in this scenario? A) The store can rescind the contract immediately and refund $100 to John. B) The store can recover from John the difference between the value of the watch and the amount paid by John. C) The store can declare the contract void and pay John no money. D) The store cannot rescind or void the contract.