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East Publishing Company employs a high-speed printing press in its operations. A typical production run of 5,000 to 50,000 copies of a textbook can be produced in less than one day. The manager of the business textbook division is attempting to determine the optimal number of copies of the seventh editions of its financial management and managerial economics textbooks to produce. Expected annual demand for the two books are 50,000 and 22,500 copies, respectively.
Furthermore, the manager does not want to produce more than a 3-year supply of either book because these textbooks are normally revised after the third year. Setup costs of getting the printing press (and bindery) ready for a production run of a given textbook are $2,500 and $2,000, respectively, for the two books. Annual carrying costs are $0.80 per copy (16 percent annual carrying charge times the $5.00 production cost per copy). For each textbook, determine the following:
a. The economic order quantity
b. The total annual inventory costs
c. The optimal ordering frequency.
The Kalodop Corporation issues 12% annual coupon bonds that pay $1,000 at maturity. These bonds mature in 15 yrs. What is the value (PV) or (Vb) of the bonds if the current or market or prevailing or going or YTM is 10%.
Calculate the ER2 that will equate P2 to P12 for the PE12 estimates given in part (b). Plot the curve ER2 on the graph begun in part (b).
South bay catering purchases three new vans, at a total cost of $57000. The company pays $23000 up front and agrees to amortize the remaining 6 years, making regular monthly payments at an annual interest rate of 6.6%. (The first payment will be one ..
The new car costs $19,999. Two options; 1) down payment of 20% and finance the balance with no interest and payments for the first few months, 2) or get a rebate of $1,000 if pays cash. The financing alternative would require to pay $460 a month for ..
In comparison with free international lending, what happens if each country imposes a 2 percent tax on the international lending? What is the net gain, or loss, for each country?
A stock currently sells for $50. In six months, it will either rise to $55 or decline to $45. The risk-free interest rate is 6% per year. Find the value of a European call option with an exercise price of $50. Find the value of a European put option ..
The Petry Company has $2,266,000 in current assets and $929,060 in current liabilities. Its initial inventory level is $589,160, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt ..
The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is 3,500,000 and it will cost an additional 250,000 to have it installed. Using the Goal Seek tool, calculate the minimum ticket price t..
You are helping your friend plan for her retirement. Your friends company has a new pension plan that will deposit $100 at the end of each month into her retirement fund (the first deposit will be made one month from today). how much must she deposit..
Calculate the conventional and modi?ed bene?t cost ratios for the following project.
Deferred annuity is purchased with annual payments for twenty-five years. The first payment of 500 starts at the end of the tenth year and subsequent payments increase 3% per year. Find the purchase price of the annuity if the effective annual intere..
Stu wants to earn a real return of 3.4 percent on any bond he acquires. The inflation rate is 2.8 percent. He has determined that a particular bond he is considering should have an interest rate risk premium of .27 percent, a liquidity premium of .08..
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