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    Methods of Evaluating Capital Projects

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    Discuss the effect of a volume increase in sales, a price increase in sales, and a cost decrease on the net operating income.

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    Solution Preview

    To effectively present this, let's start with a picture of the Income Statement:

    (less cost of goods sold)

    = Gross Profit

    (less operating expenses)
    (less other expenses)

    = Earnings Before Interest and Taxes (EBIT)

    (less Interest)
    (less Taxes)

    = Net Profit (net operating ...

    Solution Summary

    This report is an analysis of impacts as a result in increases in sales, decreases in expenses, and their effects on the reporting of income and expenses with regard to the Income Statement. It is a brief discussion of how these items will affect the operation of a firm from a reporting standpoint.