Table 6.4 Mr.Lee Is Considering a Capacity Expansion for His Supermarket.The Annual

question 128

Multiple Choice

Table 6.4
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 6.4,if Lee expands the capacity to an equivalent of $360,000 sales now (year 0) ,how much would pretax cash flow in year 5 increase because of this expansion?

• A)less than $7000
• B)more than $7000 but less than $10,000
• C)more than $10,000 but less than $13,000
• D)more than $13,000

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Definitions:

Saving

The process of setting aside a portion of current income for future use, or the funds that have been set aside for such purposes.

Disposable Income

Financial holdings households can direct towards spending and saving activities after tax deductions.

Consumption

The act of using up goods and services to satisfy human needs and wants, considered a principal component of GDP.

Durable Goods

Goods that are intended to last for a long period of time, such as cars, appliances, and furniture, typically requiring more significant investment than non-durable goods.