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Problem - Andria Mullins, financial manager of Webster Electronics, has been asked by the firm's CEO, Fred Weygandt, to evaluate the company's inventory control techniques and to lead a discussion of the subject with the senior executives. Andria plans to use as an example one of Webster's "big ticket" items, a customized computer microchip that the firm uses in its laptop computers. Each chip costs Webster $200, and it must also pay its supplier a $1,000 setup fee on each order; the minimum order size is 250 units. Webster's annual usage forecast is 5,000 units, and the annual carrying cost of this item is estimated to be 20% of the average inventory value.
Andria plans to begin her session with the senior executives by reviewing some basic inventory concepts, after which she will apply the EOQ model to Webster's microchip inventory. As her assistant, you have been asked to help her by answering the following questions:
For many firms, inventory usage is not uniform throughout the year but instead follows some seasonal pattern. Can the EOQ model be used in this situation? If so, how?
Explain what it means for all assets to have the same reward-to-risk ratio. How can you increase your return if this holds true? Why would we expect that all assets have the same reward-to-risk ratio in liquid, well-functioning markets?
If the required return is 10 percent, what is the price of the stock today?
A loan of $7,520 is to be repaid over seven years with monthly payments and an interest rate of 19.0827%, compounded annually. Set up an amortization schedule for the first two payments and the last two payments.
A company enters into a short futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call..
Stephanie’s Cafes, Inc., has declared a dividend of $1.30 per share for shareholders of record on Tuesday, May 2. The firm has 200,000 shares outstanding and will pay the dividend on May 24. How much cash will be needed to pay the dividend? When will..
To finance the investment, Vestor has issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950.
From Topic #1 in this course, we recognise that there is a focus on residual cash flows and this can be applied to undertaking time value of money calculations
Hulu common stock has a? beta, ba.b.c.All the information is there, of 0.6. The? risk-free rate is 8%?, and the market return is 16?%.
What are the effects of coupon rate to the sensitivity of a bond price and to changes in interest rates?
assume that a company announces an unexpectedly large cash dividend to its shareholders. in an efficient market
If your tax rate is 35 percent and you require a 14 percent return on your investment, what bid price per carton should you submit?
Atlas Insurance wants to sell you an annuity which will pay you $550 per quarter for 20 years. You want to earn a minimum rate of return (APR) of 5.0 percent.
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