COLLEGE FINANCE Level 1

Eli Lilly is very excited because sales for his nursery and plant company are expected to increase from $620,000 to $1,320,000 next year. Elis net assets (assets liabilities) will remain at 50 percent of sales. His firm will enjoy an 6 percent return on total sales. He will begin the year with $150,000 in the bank and is already bragging about the Jaguar and luxury townhouse he will buy.

a.

Does his optimistic outlook for his cash position appear to be justified?

Yes or No? -- Explain your choice.

b.	Compute the likely cash balance for the end of the year. (Negative answers should be indicated by a minus sign.)

$ __________