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Quantitative Problem: Jasper Jewelry has $170 million in sales. The company expects that its sales will...

Quantitative Problem: Jasper Jewelry has $170 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 + 0.08(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

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Answer #1

The amount is computed as shown below:

= $ 11 + 0.08 x $ 170 x 1.04

= $ 25.14 million

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