Sleep Tight Motel Has the Opportunity to Purchase an Adjacent

Multiple Choice

Sleep Tight Motel has the opportunity to purchase an adjacent plot of land. Building on this land would increase their capacity from the current sales level of $515,000/year to $600,000/year. Sleep Tight experiences a 20 percent before- tax profit margin. It wishes to estimate the additional before- tax profits that the expansion will produce. Using the following information, how much more before- tax cash flow would be realized just in the year 10 alone? $$\begin{array} { | r | c | } \hline \text { Year } & \begin{array} { c } \text { Capacity } \\\text { Requirement } \\\text { (Annual Sales) }\end{array} \\\hline 1 & \$ 515,000 \\2 & \$ 517,000 \\3 & \$ 520,000 \\4 & \$ 525,000 \\5 & \$ 540,000 \\6 & \$ 560,000 \\7 & \$ 565,000 \\8 & \$ 575,000 \\9 & \$ 600,000 \\\$ 620,000 \\\hline 10 & \\\hline\end{array}$$

A) less than or equal to $20,000
B) greater than $20,000 but less than or equal to $25,000
C) greater than $25,000 but less than or equal to $30,000
D) greater than 30,000