Littleton Inc. is considering expanding its operations outside of the United States. Littleton has a strong U.S. brand, allowing it to earn to a high PM. Littleton's management knows its international PM will be significantly lower but believes it can operate more efficiently abroad. Currently, Littleton has $220 million in NOA and $440 million in annual sales, generating a NOPAT of $33 million. Littleton's management group believes expanding international would result in incremental sales of $90 million, requiring an investment in additional NOA, including supporting working capital of $30 million. Due to a substantial marketing effort, Littleton anticipates its international operating income, after tax, to be $6 million.

Based solely on the above financial consideration, explain whether you would recommend management to expand internationally.

Answer rating: 100% (QA)

Whether Littleton should expand internationally based on the financial considerations provided depends on the companys strategic goals and risk appeti... View the full answer