AFN equation and the financial statement-forcasting approach both assue that assets grow at relatively the same rates as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales.

Mile Brewing Co. has used its historical sales and asset data to estimatethe following regression equations:

Accounts recievable= -$85,230+ 0.237 (sales)

Inventories = $9,340 + 0.211 (sales),

1) Brewing Co. curretly has sales of $900,000 but it expects sales to grow by 30% over the next year. Use the regression models to calculate Mile Brewing Co's forecasted values for accounts recievable and inventories needed to support next years sales.

Accounts Recieveable( possible answers) $192,060 , $240,075 , $201,663 , $211,266

nventories (possible answers) $256,210 , $204,968 , $281,831 ,$296,021

2) Based on th next year's accounts recievable and inventory levels predicted by Mile Brewing Co's regression equations, the firms DSO for next year is expected to be ___________. Use 365 days as the length of a year in all calculations

(possible answers) 47.94, 59.92 days, 50.93 days, 56.92 days