Reference no: EM13815060
A recent industry report concluded that the global demand for the good X is expected to increase. Based on the demand projections given in the report Colaba, a firm that produces and sells X, is contemplating hiring more labor to increase production. Maria Williams and Christopher Lockhart, both stock market analysts, are discussing the prospects of the firm. Maria thinks that Colaba is a good stock to buy because she expects their profits to increase. Christopher’s opinion differs. He says that an increase in Colaba’s workforce will only increase the wage bill and reduce its profits.
Which of the following, if true, would strengthen Maria’s argument that Colaba’s profits will increase as more labor is hired to cater to the increased demand?
a. The current rate of capacity utilization at Colaba is only 55 percent.
b. Good X is produced by highly skilled workers.
c. Colaba recently revamped the safety code and regulations at its factories.
d. Recently, the government increased the corporate tax rate.
e. Colaba’s market capitalization is among the highest in the country.
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