(Forecasting revenues using scenario analysis) (Related to Checkpoint 13.3 on page 451) Floating Homes, Inc., is a manufacturer of luxury pontoon and houseboats that sell for $40,000 to $100,000. To estimate its revenues for the following year, Floating Homes divides its boat sales into three categories based on selling price (high, medium, and low) and estimates the number of units it expects to sell under three different economic scenarios. These scenarios include a recession (Scenario I), a continuation of current conditions in which the economy is level or unchanged (Scenario II), and a strong economy (Scenario III). These estimates are as follows: Scenario I: Recession Scenario II: Level Economy Strong Economy Scenario II: Probability 25% 50% 25% High-Priced Boats Category Unit sales 50 400 1,000 Average price per unit $80,000 $90,000 $95,000 Medium-Priced Boats Category Unit sales 100 800 3,000 Average price per unit $60,000 $70,000 $80,000 Low-Priced Boats Category Unit sales 200 1,500 5,000 Average price per unit $50,000 $50,000 $50,000 Using these estimates, calculate the expected revenue for Floating Homes, Inc., for the following year.

(Forecasting revenues using scenario analysis) (Related to Checkpoint 13.3 on page 451) Floating Homes, Inc., is a manufacturer of luxury pontoon and houseboats that sell for $40,000 to $100,000. To estimate its revenues for the following year, Floating Homes divides its boat sales into three categories based on selling price (high, medium, and low) and estimates the number of units it expects to sell under three different economic scenarios. These scenarios include a recession (Scenario I), a continuation of current conditions in which the economy is level or unchanged (Scenario II), and a strong economy (Scenario III). These estimates are as follows: Scenario I: Recession Scenario II: Level Economy Strong Economy Scenario II: Probability 25% 50% 25% High-Priced Boats Category Unit sales 50 400 1,000 Average price per unit $80,000 $90,000 $95,000 Medium-Priced Boats Category Unit sales 100 800 3,000 Average price per unit $60,000 $70,000 $80,000 Low-Priced Boats Category Unit sales 200 1,500 5,000 Average price per unit $50,000 $50,000 $50,000 Using these estimates, calculate the expected revenue for Floating Homes, Inc., for the following year.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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