Jasper Jewelry has $140 million in sales. The company expects that its sales wil

Question

Jasper Jewelry has $140 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 = $11 + 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.

Explanation / Answer

Given Inventories = 11 + 0.09 * Sales

Sales Next year = 140 M*(1+0.04) = $ 145.6 M

Inventories =11 + 0.09 * 145.6 = $ 24.10 M

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