Quantitative Problem: Jasper Jewelry has $130 million in sales. The company expe

ID: 2722910 • Letter: Q

Question

Quantitative Problem: Jasper Jewelry has $130 million in sales. The company expects that its sales will increase 4% this year. Jasper's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is as follows:

Inventories = $10 + 0.09(Sales)

Given the estimated sales forecast and the estimated relationship between inventories and sales, what is your forecast of the company's year-end inventory level? Round your answer to two decimal places. Do not round intermediate calculations.
$--------- million

Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars):

Looking ahead to the following year, the company's CFO has assembled this information:

Year-end sales are expected to be 6% higher than $4.1 billion in sales generated last year.

Year-end operating costs, including depreciation, are expected to increase at the same rates as sales.

Interest costs are expected to remain unchanged.

The tax rate is expected to remain at 40%.

On the basis of this information, what will be the forecast for Edwin's year-end net income? Round your answer to the nearest whole million. Do not round intermediate calculations. Enter all values as positive numbers.

Sales $4,100 Operating costs excluding depreciation 3,008 EBITDA $1,092 Depreciation 300 EBIT $792 Interest 140 EBT $652 Taxes (40%) 261 Net income $391

Explanation / Answer

Sales = $130 million + 4%

Increase of 4% = $5.2 million

Therefore sales value = $130 million + $5.2million = $135.2 million

Projected sales= $135.2 Million

Given inventory = $ 10 + 0.09(sales)

Therefore Inventory = $10+ 0.09( $135.2Million)

= $10 + $12.168 Million = $ 22.168 Million

Hence it is understood that when the Jewelry has a sale value of 135.2 Million their stock to be maintained will be = $ 22.2 million

next problem

Particulars

Amount (in $) Billion

Sales

4,346

Operating costs excluding depreciation

3,188.48

EBITDA

1,157.52

Depreciation

318

EBIT

839.52

Interest

140

EBT

699.52

Taxes (40%)

279.808

Net Income

419.712

Net income = $ 419.71 Billion