ipsaccuratelydepictthefuturetheperce
tofsalesmethodwillgivevaluesthatreaso
ablyreprese
tthevaluesderivedthroughtheproformastateme
tsa
dthecashbudget
Copyright2005byTheMcGrawHillCompa
iesI
c
S114
fProblems
41
MrEliLillyisveryexcitedbecausesalesforhis
urserya
dpla
tcompa
yare
expectedtodoublefrom600000to1200000
extyearEli
otesthat
et
assetsassetsliabilitieswillremai
at50perce
tofsalesHisfirmwille
joy
a
8perce
tretur
o
totalsalesHewillstarttheyearwith120000i
the
ba
ka
disbraggi
gabouttheJaguara
dluxurytow
househewillbuyDoes
hisoptimisticoutlookforhiscashpositio
appeartobecorrectComputehis
likelycashbala
ceordeficitforthee
doftheyearStartwithbegi
i
gcash
a
dsubtracttheassetbuildupequalto50perce
tofthesalesi
creasea
dadd
i
profit
Solutio

EliLilly
Begi
i
gcashAssetbuildupProfitE
di
gcash
120000300000
9600084000
12x6000008x1200000Deficit
Nohewillactuallye
dupwitha
egativecashbala
ce
42
I
problem1iftherehadbee
oi
creasei
salesa
dallotherfactswerethe
samewhatwouldEli’se
di
gcashbala
cebeWhatlesso
dotheexamplesi

problemso
ea
dtwoillustrate
Solutio

EliLillyco
ti
ued
Begi
i
gcashNoassetbuildupProfitE
di
gcash
120000
48000168000
8x600000
Thelesso
tobelear
edisthati
creasedsalesca
i
creasethefi
a
ci
grequireme
tsa
dreducecasheve
foraprofitablefirm
S115
Copyright2005byTheMcGrawHillCompa
iesI
c
f43
Gibso
Ma
ufacturi
gCorpexpectstosellthefollowi
g
umberofu
itsof
steelcablesatthepricesi
dicatedu
derthreediffere
tsce
ariosi
the
eco
omyTheprobabilityofeachoutcomeisi
dicatedWhatistheexpected
valueofthetotalsalesprojectio

OutcomeABC
Probability020050030
U
its100180210
Price202530
Solutio

Gibso
Ma
ufacturi
gCorporatio

1
2
34
5
OutcomeABC
Total
ProbabilityU
itsPriceValue
20
100202000
50
180254500
30
210306300
Totalexpectedvalues
6Expected
Value2x5
4002250189004540
44
ERMedicalSupplieshadsalesof2000u
itsat160peru
itlastyearThe
marketi
gma
agerprojectsa25perce
ti
creasei
u
itvolumethisyearwitha
10perce
tpricei
creaseRetur
edmercha
disewillreprese
t5perce
toftotal
salesWhatisyour
etdollarsalesprojectio
forthisyear
Solutio

ERMedicalSupplies
U
itvolumePriceTotalsalesRetur
s5Netsales
2000x125160x110
2500x176
44000022000
418000
Copyright2005byTheMcGrawHillCompa
iesI
c
S116
f45
SalesforRossPro’sSportsEquipme
tareexpectedtobe4800u
itsfor