Innovative Inc

Multiple Choice

Innovative Inc. is experiencing a boom for the products it has introduced recently. The estimated annual sales projected for the next five years are given in the following table. The current capacity is equivalent to only $100 million sales. The company is considering the alternative of expanding capacity to an equivalent of $250 million sales. Assume a 25 percent pretax profit margin. What is the increase in total pretax cash flow (summed over all years) that would be enjoyed because of the expansion?

A) less than or equal to $40 million
B) more than $40 million but less than or equal to $70 million
C) more than $70 million but less than or equal to $100 million
D) more than $100 million