Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
MARGINAL ANALYSIS
It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sidesteps an unmanageable conditional profit table. We will illustrate the procedure and its advantages through the following example.
Example
The fresh from the fields, vegetable and fruit wholesalers buys, produce and then sells to retailers. Currently, green peas are available. The wholesaler pays Rs.200 per box of peas. A box sold on the same day fetches Rs.300, otherwise it has a salvage value of Rs.50. Historical data has established the following demand for green peas.
Number of boxes
21
22
23
24
25
26
27
28
Probability
0.07
0.08
0.10
0.11
0.29
0.20
0.09
0.06
The wholesaler has decided to stock the optimal number of boxes based on the expected profit criterion.
Let us solve the problem using the conditional profit table. Note that the profit generated by the sale of one box is Rs.100 and the loss incurred on an unsold box is Rs.150.00.
Conditional Profit Table
Stocking level
Daily Demand
Expected profit
21(0.07)
22(0.08)
23(0.10)
24(0.11)
25(0.29)
26(0.20)
27(0.09)
28(0.06)
2100
1950
1800
1650
1500
1350
1200
1050
2200
2050
1900
1750
1600
1450
1300
2300
2150
2000
1850
1700
1550
2400
2250
2500
2350
2600
2450
2700
2550
2800
2100.00
2182.50
2245.00
2282.50
2292.50
2230.00
2117.50
1982.50
From the table, we see that the optimal stocking level is 25 (which generates the maximum expected profit of Rs.2,292.50).
As it can be seen, this approach is tedious and the conditional profit table is bound to become unmanageable.
Company capacity to continue trading Given the preceding discussion it is unlikely that the business can continue in its current form. The trading performance is clearly very
We have seen computation of present value using single discount rate. But the right way to value a cash flow of a bond is to use multiple discount rates, i.e valuing th
Operating Budget It is a collection or set of formal financial documents that details expected expenses and revenues, as like all other expected operating and financial transac
Various Types of Strategies Different types of hedge fund strategies are discussed as follows: Relative Value of Strategies: Relative value strategies are also known as no
7. Bill Peters is the investment officer of a $60 million pension fund. He has become concerned about the big price swings that have occurred lately in the fund’s fixed income sec
2.5. Västerås Corporation plans to buy a truck for $40,000 and depreciate it fully over 5 years using straight-line method of depreciation. However, it plans to use it for 8 years
To calculate the Cost of Capital, we will use the Weighted Average Cost of Capital (WACC) formula WACC = (E/V) X R E + (D/V) X R D X (1 - T C ) where
exercise
I need to prepare a monthly cash flow for a company with the given information, and need to comment on the current performance and the future sales increment. Then we need to find
Acquisition (takeover) or merger A merger is the synergy or combination of two companies which are roughly equal in size by consensus of two organisations. A takeover is where
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd