How Much Will the Company's Net Operating Income Be Increased

question 61

Multiple Choice

How much will the company's net operating income be increased or (decreased) if it prices the 1,000 units in the special order at $6 each?

• A) ($500)per month.
• B) $400 per month.
• C) $1,000 per month.
• D) $2,500 per month.

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Definitions:

Flotation Costs

Those costs occurring when a company issues a new security, including fees to an investment banker and legal fees.

New Common Shares

Issuance of additional shares of a company's stock, which can dilute existing shareholders' equity but raise new capital for the company.

Flotation Cost

The total costs that a company faces when it issues new securities, including underwriting fees, legal fees, and registration fees.

Retained Earnings

Cumulative net earnings not distributed as dividends to shareholders, but instead reinvested in the business.