Table 44
Mr -Using the Information in Table 4

question 127

Multiple Choice

Table 4.4
Mr. Lee is considering a capacity expansion for his supermarket. The annual sales projected for the next five years follow. The current capacity is equivalent to $300,000 sales. Assume a 20 percent pretax profit margin.
$$\begin{array} { | c | c | } \hline \text { Year } & \begin{array} { c } \text { Annual Sales } \\( \$ 000 ) \end{array} \\\hline 1 & 310 \\2 & 320 \\3 & 340 \\4 & 370 \\5 & 400 \\\hline\end{array}$$
-Using the information in Table 4.4,if Lee expands the capacity to an equivalent of $360,000 sales now (year 0) ,and then expands the capacity to an equivalent of $400,000 sales at the beginning of year 4,how much would pretax cash flow increase in total for all years (years 1 through 5) ?

• A) less than $30,000
• B) more than $30,000 but less than $40,000
• C) more than $40,000 but less than $50,000
• D) more than $50,000

---

Definitions:

Compensation Packages

The combination of salary, bonuses, benefits, and other forms of financial rewards that an employer provides to an employee.

Residual Rights Theory

A concept in labor law that suggests employees have rights to certain workplace conditions not explicitly outlined in contracts.

Management Rights Clauses

Sections of a labor contract that delineate the powers and prerogatives of management to operate and manage the business.

Contract Provisions

Specific clauses or terms included in a contract that dictate the obligations, rights, and exceptions within the agreement.