Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the following net cash flows. The
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Answer:
Explanation:
ending inventory
Q1 = q2 sales x 40% = 7,100 x 40% = 2,840
Q2 = q3 sales x 40% = 8,100 x 40% = 3,240
Q3 = q4 sales x 40% = 10,100 x 40% = 4,040
Q4 = q1 next year x 40%
next year will be 25% than q1 of current year
Q4 = Q1 sales x 1.25 x 40% = 2,550
beginning of Q1 is a given 2,040. Then:
ending of Q1 = beginning of Q2 (when a quarter ends, another begins)
ending of Q2 = beginning of Q3
ending of Q3 = beginning of Q4
The sales plus the desired ending inventory will be all the units needed for the period.
Our beginning inventory subtract out productions needs, as those units are already in stock, we don't need to produce them.