1)

Sharpe Knife Company expects sales next year to be $1,740,000 if the economy is strong, $920,000 if the economy is steady, and $740,000 if the economy is weak. Mr. Sharpe believes there is a 20 percent probability the economy will be strong, a 55 percent probability of a steady economy, and a 25 percent probability of a weak economy.

What is the expected level of sales for the next year?

2)

Antivirus Inc. expects its sales next year to be $4,300,000. Inventory and accounts receivable will increase by $660,000 to accommodate this sales level. The company has a steady profit margin of 15 percent with a 35 percent dividend payout.

How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.

External funds needed

3)

Gary