Question

In: Finance

Suppose you determine that a firm's real sales in 2006 would be $10 million (in terms...

Suppose you determine that a firm's real sales in 2006 would be $10 million (in terms of 2004 dollars). What would the firm's nominal 2006 sales be assuming an annual inflation of 3% in both 2005 and 2006?

Group of answer choices

$10.609 million

$9.709 million

$9.426 million

Not possible to compute this without knowing CPIs in 2004 and 2006

$10.3 million

Solutions

Expert Solution

Nominal sales in 2006 = Real sales in 2006 in terms of 2004 dollars * (1 + rate of inflation)^2

Nominal sales in 2006 = 10 * (1 + 0.03)^2

Nominal sales in 2006 = 10 * 1.0609

Nominal sales in 2006 = $10.609 million

Option A is correct


Related Solutions

Suppose that in January 2006, Kenneth Cole Productions had sales of $518 million, EBITDA of $55.6...
Suppose that in January 2006, Kenneth Cole Productions had sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, and 21 million shares outstanding. Sales 518.00 EBITDA 55.60 Cash 100.00 Debt 3.00 Shares outstanding 21 a) Using the average enterprise value to EBITDA multiple in Table 1, estimate KCP’s share price. b) What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in Table...
Suppose a firm's sales are likely to grow by 4.23%, and you believe there is a...
Suppose a firm's sales are likely to grow by 4.23%, and you believe there is a 67% chance of that happening. At your most optimistic, they might grow by 8.68%, and at your most pessimistic, 2.21%, which you believe to be equally likely outcomes. What is your expected sales growth? Give your answer in percent and provide at least two decimal places, e.g., 5.92, not 0.0592.
Suppose a​ firm's tax rate is 35%. a. What effect would a $9.85 million operating expense...
Suppose a​ firm's tax rate is 35%. a. What effect would a $9.85 million operating expense have on this​ year's earnings? What effect would it have on next​ year's earnings? b. What effect would a $9.25 million capital expense have on this​ year's earnings if the capital is depreciated at a rate of $1.85 million per year for five​ years? What effect would it have on next​ year's earnings?
Shalit Corporation's 2011 sales were $8 million. Its 2006 sales were $4 million. At what rate...
Shalit Corporation's 2011 sales were $8 million. Its 2006 sales were $4 million. At what rate have sales been growing? Round your answer to two decimal places
Suppose the market price is $10 (this is also the firm's marginal cost), a firm's quantity...
Suppose the market price is $10 (this is also the firm's marginal cost), a firm's quantity sold is 11, and the average total cost for the firm at that price is $7. What is the firm's profit? $330 $0 $110 $33 The firm would not produce at this quantity because it does not maximize the firm's profit.
The Robbins Corporation is an oil wholesaler. The​ firm's sales last year were $1.01 ​million, with...
The Robbins Corporation is an oil wholesaler. The​ firm's sales last year were $1.01 ​million, with the cost of goods sold equal to $620,000. The firm paid interest of $179,000 and its cash operating expenses were $102,000.​ Also, the firm received $40,000 in dividend income from a firm in which the firm owned 22% of the​ shares, while paying only $11,000 in dividends to its stockholders. Depreciation expense was $50,000. Use the corporate tax rates shown in the popup​ window...
What terms (words) would you insist be included in the Sales Contract so you would not bear the Risk of Loss?
Here is the fact pattern I want you to base your answer on:You want the latest in mini laptop computers.You find what you need by searching on the Internet.The seller is in Taiwan.You negotiate a deal with the seller over the Internet and buy the computer.The seller agrees to ship you the computer by boat.Answer this Question: (minimum 200 words; any format)What terms (words) would you insist be included in the Sales Contract so you would not bear the Risk...
Suppose a firm makes purchases of Rs 10.95 million per year under terms of 2/10, net...
Suppose a firm makes purchases of Rs 10.95 million per year under terms of 2/10, net 30, and takes discounts. i. What is the average amount of accounts payable net of discounts? (Assume the Rs 10.95 million of purchases is net of discounts—that is, gross purchases are Rs 11,173,469.40, discounts are Rs 223,469.40, and net purchases are Rs 10.95 million.) ii. Is there a cost of the trade credit the firm uses? iii. If the firm did not take discounts...
Cash Discounts Suppose a firm makes purchases of $3.85 million per year under terms of 2/10,...
Cash Discounts Suppose a firm makes purchases of $3.85 million per year under terms of 2/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round A. What is the average amount of accounts payable net of discounts? (Assume that the $3.85 million of purchases is net of discounts - that is, gross purchases are $3,928,571, discounts are $78,571, and net purchases are $3.85 million.) Round your answer to the nearest dollar. $...
Cash Discounts Suppose a firm makes purchases of $3 million per year under terms of 3/10,...
Cash Discounts Suppose a firm makes purchases of $3 million per year under terms of 3/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round intermediate calculations. What is the average amount of accounts payable net of discounts? (Assume that the $3 million of purchases is net of discounts - that is, gross purchases are $3,092,784, discounts are $92,784, and net purchases are $3 million.) Round your answer to the nearest dollar....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT