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5. Using regression analysis to forecast assets The AfN equation and the finandal statement-forecasting approach both assume that assets grow at reatively the same rate as sales. However, the: relationship between assets and sales is often a litte more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Leeding Engines Ltd. has used its historical sales and asset data to estimate the following regression equations: Leeding Engines Ltd, corrently has sales of $1,110,000, but it expects soles to grow by 10\% over the next year. Use the regression models to calculate. Leeding Engines Ltd's forecasted values for accounts receivable and inventories needed to support next year's sales. Based on the next year's accounts recelvable and inyentory levels predicted by Loeding Engines thats regression equations, the firm's 0so for nect. vear is expected to be . Use 305 days as the length of a year in all calculations. Bohemian Manufacturing Company Balance Sheet For the Year Ended on December 31 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming vear. In the vear that fust ended, Bohemian Manulacturing Combany generated $500,000 net income on sales of $12,500,000. The firm expects sales to increase by 1996 this corning year and also expects to maintain its lone-run dividend payout ratio of 40%. Suppose Bohemian Manufacturing Company's assets are fully utilized, Use the additional funds needed (AFN) equation to determine the increase in total assuts that is necossary to support Bohemlan Manufacturing Company's expected sales, (Note: Do not round intermediate calculations.) $590,5001570,0001527,0001644,000 When a fiem grows, some liabilities grow spontaneously along with sales. Spontaneous Labilities are a source of capital that the firm will generate internally, so they reduce the need for external capical, How much of the total increase in assets will be supplied by spontaneous liabilities for Bchemian Manufacturing Compary this yean? (Note: Do not round intermediate calculations.) When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Bohemian Manufacturing Company this year? (Note: Do not round intermediate calculations.) $79,800$76,000$91,200$83,600 In addition, Bohemian Manufacturing Company is expected to venerate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit maroin and dividend payout ratio are expected to remain constant. Given the preceding information, Bohemian Manufacturing Company is expected to generate 5 from operations that will be added to retained earnings. (Note: Do not round intermediate calculations.) According to the AFN equation and projections for Bohemian Manufacturing Company, the firmis AFN is s (Note: Do not round intermediate calculabions.)