Table $5.4$ Mr Lee Is Considering a Capacity Expansion for His Supermarket

question 120

Multiple Choice

Table $5.4$
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.


-Using the information in Table 5.4, if Lee expands the capacity to an equivalent of $360,000 sales now (year 0) , how much would pretax cash flow in year 1 increase because of this expansion?

• A) less than $3000
• B) more than $3000 but less than $5000
• C) more than $5000 but less than $7000
• D) more than $7000

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Definitions:

Supplier Strategic Alliances

Partnerships formed between companies and their suppliers to achieve strategic goals, enhance competitiveness, and secure supply chains.

Preferred Supplier-Customer Relationships

Business arrangements where mutual benefits are derived from long-term associations between suppliers and their key customers, often characterized by trust and cooperation.

Quality Supplies

Materials or goods of high standard or grade used in the production of products or in the provision of services.

Virtual Organization

A structure enabled by digital technologies that allows individuals or entities across different locations to collaborate and function as a single entity.