Reference no: EM132865450

Question - You are the Accountant for Duke Street, Inc. and your boss asks you to provide the bank with a profit forecast for the coming year. Sales and profitability have both been trending downward over the last five years. Technological advancements have made the current product less attractive. Duke has developed a new product consistent with their perceptions of consumer behavior. The company is requesting a loan from the bank to launch the new product; the loan is very necessary. The forecast that you provide to the bank will determine whether or not the bank issues the much needed loan.

Your boss is convinced that profits will be at least $500,000 - anything less than $500,000 and the bank will not approve the loan. Your analysis indicates three possible outcomes:

Outcome 1: If sales of the new product are extraordinary, then profits will exceed $500,000.

Outcome 2: If sales of the new product are modest, then the profits will be $100,000. This is most likely to occur.

Outcome 3: If the sales of the new product fail, then the company will experience a loss of $600,000

If the bank does not grant the loan, then the new product will not launch and bankruptcy is a real possibility for the company.