Eastern Clothing has two locations.

The most recent income statement is as follows: (in $millions)

Florida Chicago Total

Sales 40 10 50

Variable Costs 22 3 25

Contribution Margin 18 7 25

Fixed Costs (note 1) 12 12 24

Operating Income 6 (5) 1

Note 1: Fixed costs for Chicago include $3 in depreciation for equipment - The equipment has no disposal value. Fixed costs include $8 in corporate costs (allocated as $4 to each store).

Eastern is considering closing its Chicago store. If Chicago is closed, the following will likely occur:

A. Sales at Florida will increase by 10%

B. Overall corporate costs will be reduced from $8 to $6

C. Florida will have to rent more space - this will increase rent from $3 to $4 per year

Required: Compute net income if Eastern Stores closes the Chicago location.