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4) Jasper Furnishing has $ 300 million in sales. The company expects that its sales will increase 12% this year. Jaspers CEO 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:
Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecasts of the company’s year end inventory level and its inventory turnover ratio?
Sales1 = Sales0*(1.12) = 300m(1.12) = 336m
Inventories=$25m+42m = $67m
Inventory Turnover Ratio = COGS/Inventory OR Sales/Inventory = 336/67 = 5...
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