Financial accounting Question:Your company wants to expand and it will cost $100,00.Your current sales are $1 million and your sales growth is12%. If you expect no increase in expenses, can youexpand next year?a) No, your increase in sales will not cover the expense.b) No, your expansion costs will go up.c) Yes, your increase in sales will cover the expense.d) Yes, your expansion costs will go down.

Explanation of Sales Growth:Sales growth represents the percentage increase in a company's sales…

Answered: Question: Your company wants to expand…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Question: Your company wants to expand and it will cost $100,00. Your current sales are $1 million and your sales growth is 12%. If you expect no increase in expenses, can you expand next year? a) No, your increase in sales will not cover the expense. b) No, your expansion costs will go up. c) Yes, your increase in sales will cover the expense. d) Yes, your expansion costs will go down.
Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
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