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.
Foreign Exchange Market Equilibrium: We say that the foreign exchange market is in equilibrium when deposits of all currencies o er the same expected rate of return (when retu
Stabilization Policies in the AA-DD Model. Suppose the economy of Zion has reached the long run equilibrium (i.e. full employment). Now assume that a best-seller, written by Ne
As we know that price of option-free bond changes in the opposite direction from a change in bond's required yield, Table 1 and figure 1 explains this feature of
Q. Describe the Walters dividend model? Walter's Model: - Walter's model maintains the doctrine that the dividend policy is relevant for the value of the firm. As-per to the Wa
Q. Firms operation and financing decision? Firms operation and financing decision risks or the variability of returns also results for the decision make within the company. Ris
what is the sensitivity analyses
Q. Show the Supposition of MM Hypothesis? Supposition of MM Hypothesis:- (i) There are ideal capital markets. (ii) Investors act rationally. (iii) Information regardin
A firm requires a clear policy regarding as to whether the credit should be authorized to a customer and if yes to what extent. Credit principles are set for making such decisions.
Determine Net present value according to Ezra Solomon " The gross present worth of a course of action is equal to the capitalised value of the flow of future expected benefit,
Define the importance of mutual funds in the investment intermediaries. Mutual funds: Mutual funds pool resources by several companies and individuals and invest these re
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