The Janus Vending Machine Company is looking to expand its business by adding a

Question

The Janus Vending Machine Company is looking to expand its business by adding a new line of vending machines. The management team is considering expanding into either soda machine Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data lor the most recent year follow: Assuming the Sporty line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $32.000 per year, how will operating income be affected?

Explanation / Answer

49- Note- Tax Rate is not given hence depreciation is not relevant.

50- Net Income will increase by $22000

Year Cash Flow(soda) PVF@8% CF*PVF@5% 0 -$75,000.00 1.0000 -$75,000.00 1 $30,000.00 0.9259 $27,777.78 2 $30,000.00 0.8573 $25,720.16 3 $30,000.00 0.7938 $23,814.97 4 $30,000.00 0.7350 $22,050.90 5 $60,000.00 0.6806 $40,834.99 NPV $65,198.80

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