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Hi everyone, I’m working on B4 Sims (Beckers) and came across the following question:
Calculate the company’s projected Year 2 net sales using scenario analysis.
Net sales at year ended 12/31/Year1 = $375,000,000
Facts: Data for Scenario Analysis:
Net sales will remain flat (40% probability)
Net sales will increase 10% (30% probability)
Net sales will decrease 10% (30% probability)Solution given by Becker:
Most Likely scenario (40%): $375,000,000
Upside scenario (30%): 375,000,000 x (1+10%) = $412,500,000
Downside scenario (30%): $375,000,000 x (1-13%*) = $326,250,000
Answer: ($375M X 40%) + (412,500,000X30%) + (326,250,000×30%) = $371,625,000.My question to you guys: Does anyone know where the 1-13% comes from?
or Does anyone have a better/easier way of solving this problem?.Thanks in advance.
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