The financial manager of Company X has just received the sales forecast for next year and it indicates that the year's sales are expected to double in the second half. What are the challenges that Company X might face in increasing its production to meet the sales projections and how can these challenges be overcome? What risks does Company X face by ramping-up production to meet the sales forecast?
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- Suppose the company has to revise its estimates because of a downturn in the economy. Unit sales for August, September, and October will be half (50%) of the original estimates. Revise the estimates in cells 1311 through 1313. After this is done, check your forecasted balance sheet. It should still balance! What effect will this new state of affairs have on net income and borrowing? Explain why these items changed.Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?Gary’s Pipe and Steel company expects sales next year to be $910,000 if the economy is strong, $655,000 if the economy is steady, and $376,000 if the economy is weak. Gary believes there is a 10 percent probability the economy will be strong, a 55 percent probability of a steady economy, and a 35 percent probability of a weak economy. What is the expected level of sales for next year?
- “We really need to get this new material – handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short term loan down at Metro bank”. Maria Wilcox, Global Electronics general manager of marketing has recently completed a sales forecast. She believes the company’s sales during the first quarter of 2021 will increase by 10% each month over the previous month s’ sales. Than Wilcox expects sales to remain constant for several months. Global ‘s projected balance sheet as of Dec 31 2020 is as follow: Cash 70,000 A/c receivable 540,000 Marketable securities 30,000 Inventory…CelebNav, Inc., had sales last year of $700,000, and the analysts are predicting strong future performance for the start-up, with sales growing 20 percent a year for the next three years. After that, the sales should grow 11 percent per year for two years, at which time the owners are planning to sell the company. What are the projected sales for the last year before the sale?In this exercise, we develop a model for the growth rate G, in thousands of dollars per year, in sales of a product as a function of the sales level s, in thousands of dollars.† The model assumes that there is a limit to the total amount of sales that can be attained. In this situation, we use the term unattained sales for the difference between this limit and the current sales level. For example, if we expect sales to grow to 4 thousand dollars in the long run, then 4 − s gives the unattained sales. The model states that the growth rate G is proportional to the product of the sales level s and the unattained sales. Assume that the constant of proportionality is 0.8 and that the sales grow to 2 thousand dollars in the long run. (a) Find a formula for unattained sales.(b) Write an equation that shows the proportionality relation for G.G =
- Suppose that you expect a ceteris paribus decrease in average incomes of 10% this year compared to last year. How many aircrafts do you estimate that your company will sell this year? How will it impact total revenues?Home Automation is considering an investment of $500,000 in a new product line. The company will make the investment only if it will result in a rate of return of 15% per year or higher. If the revenue is expected to be between $138,000 and $165,000 per year for 5 years, use a present worth analysis to determine if the decision to invest is sensitive to the projected range of revenue.Recall that if the economy continues to be strong, Carson Company may need to increase its production capacity by about 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate the increase in production. Recall that the yield curve is currently upward sloping. Also recall that Carson is concerned about a possible slowing of the economy because of potential Fed actions to reduce inflation. It needs funding to cover payments for supplies. It is also considering the issuance of stock or bonds to raise funds in the next year a. At a recent meeting, the Chief Executive Officer (CEO) stated his view that the economy will remain strong, as the Fed's monetary policy is not likely to have a major impact on the interest rates. So he wants to expand the business to benefit from the expected increase in demand for Carson's products. The next step would be to determine how to finance the expansion. The Chief Financial Officer (CFO) stated that if…
- To increase Sales and Sales Growth, the top Marketing Manager suggested to price products slightly lower than the main competitor and at the same time increase product quality (competitor is not expected to react or make changes). This strategy would require an initial one time investment today of $1 million in advertising (and for some machines) and the Net Profit Margin (and Cash Flows) will be zero for years 1, 2, 3. However, sales are expected to grow 20% in years 1,2,3 (then sales will stabilize and sales growth will be 1% in year 4 and over). Also, in year 4 Net Profit Margin will return to 5% (due to economies of scale). (Some numbers have been pre-filled in the tables below). CURRENT BUSINESS SITUATION END OF YEAR 0 1 … Sales Growth 0% … Net Profit Margin 5% … Sales ($Millions) 80.00 … Profit or Cash Flow 4.00 … NPV(i=.15) 26.67 $Millions SUGGESTED SALES…As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy. Expanding Economic economy recession Stock market investment Commodity investment 20 10 -10 15 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ commodities $ (b) What profit can the Carringtons expect to make on their…As part of their investment strategy, the Carringtons have decided to put $100,000 into stock market investments and also into purchasing precious metals. The performance of the investments depends on the state of the economy in the next year. In an expanding economy, it is expected that their stock market investment will outperform their investment in precious metals, whereas an economic recession will have precisely the opposite effect. Suppose the following payoff matrix gives the expected percentage increase or decrease in the value of each investment for each state of the economy. Expanding Economic economy recession Stock market investment Commodity investment 30 5 -10 20 (a) Determine the optimal investment strategy for the Carringtons' investment of $100,000. (Round your answers to the nearest dollar.) stocks $ commodities $