Question

What is the forecasted value of property, plant and equipment (pp&e) based on the following information: capital asset turnover ratio 3. 2 forecasted revenues 4,600 forecasted costs of good sold 2,100 depreciation 800 days in period 365.

Answer 1

The value of the property, plan and equipment is important for estimating the current, short run and long run capital requirements of the firm for a given period using the ratios.

• The values given to us are as the capital assets turnover ratio is 3.2 and the forecasted costs of goods sold is $2100 whereas the forecasted revenues of the firm is $4600, depreciation is 800 in 365 days.

• The calculation of estimated property, plan and equipment of a firm can be calculated by using the formula as given below by putting the available values.

Forecasted PP&E = Forecasted Revenues/Capital Assets - Depreciation

                             =4600/3.2 - 800

                             =637.5

Therefore, forecasted PP&E= $637.5

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