Table 6.7 The B.Sharp Company Has a Rapidly Growing Product Line That

Table 6.7
The B.Sharp Company has a rapidly growing product line that requires two work centers,X and Y for manufacture.Work Center X has a current capacity of 50,000 units per year,and Work Center Y is capable of 55,000 units per year.This year (year 0) ,sales of the product line are expected to reach 50,000 units.Growth is projected at an additional 3,000 units each year through year 3.Pre-tax profits are expected to be $60 per unit throughout the 3-year planning period.Two alternatives are being considered:
-Use the information in Table 6.7.What is the pre-tax cash flow (net present value) for alternative #1 compared to the base case of doing nothing for the next five years?

A) negative pre-tax cash flow
B) more than $0 but less than $100,000
C) more than $100,000 but less than $200,000
D) more than $200,000

Correct Answer:

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