Option #1 Analysis of Payton Furniture Corp.PaytonFurniture

Option #1: Analysis of Payton Furniture Corp.PaytonFurniture Corp. is nationally recognized for making  high-qualityproducts. Management is concerned that the company is not fully exploiting its brand power. Payton’s production managers are alsoconcerned  because their plants are not operating at near full capacity.Management is  currently considering a proposal to offer a new line ofaffordable furniture.Those in favor of the proposal (includingthe vice president  of production) believe that, by offering these newproducts, the company could  attract a clientele that it is notcurrently servicing. It could also operate  its plants at full capacity,thus taking better advantage of its assets.The vice president ofmarketing, however, believes that the  lower-priced (and lower-margin)product would have a negative impact on the  sales of existing products.The vice president believes that $10,000,000 of the  sales of the newproduct will be from customers that would have purchased the  moreexpensive product but switched to the lower-margin product because itwas  available. (This is often referred to as cannibalization ofexisting sales.)  Top management feels, however, that even withcannibalization, the company’s  sales will increase and the company willbe better off.The following data are available:(In Thousands)Current ResultsProposed Results  without CannibalizationProposed Results  with CannibalizationSales Revenue$45,000$60,000$50,000Net Income$12,000$13,000$12,000Average total  assets$100,000$100,000$100,000Instructions:Compute Payton’s return on assets, profit  margin, and asset turnover, both with and without the new product line.Discuss the implications that your findings in  part (A) have on Payton’s decision.Are there any other options that Payton should  consider? What impact would each of these have on the above ratios?Showyour work and use MS Excel or Word for your submission.  The writtenportion of your assignment should be 4-6 pages in length with  documentand citation formatting conformity with the CSU-Global  Guide to Writing and APA Requirements.