Ramos Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the se
1 answer:
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Answer:
a.
Bond Price = $563,333.90007 rounded off to $563,333.90
b.
Bond Price = $502500
c.
Bond Price = $437232.16025 rounded off to $437232.16
Explanation:
To calculate the quote/price of the bond today, which is the present value of the bond, we will use the formula for the price of the bond. As the bond is a semi annual bond, we will use the semi annual coupon payment, semi annual number of periods and semi annual YTM. The formula to calculate the price of the bonds today is attached.
a. Case A: Market interest rate (annual): 4 percent
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 4% * 6/12 = 0.02 or 2%
Bond Price = 15075 * [( 1 - (1+0.02)^-14) / 0.02] + 502500 / (1+0.02)^14
Bond Price = $563,333.90007 rounded off to $563,333.90
b. Case B: Market interest rate (annual): 6 percent
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 6% * 6/12 = 0.03 or 3%
Bond Price = 15075 * [( 1 - (1+0.03)^-14) / 0.03] + 502500 / (1+0.03)^14
Bond Price = $502500
c. Case C: Market interest rate (annual): 8.5 percent.
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 8.5% * 6/12 = 0.0425 or 4.25%
Bond Price = 15075 * [( 1 - (1+0.0425)^-14) / 0.0425] + 502500/(1+0.0425)^14
Bond Price = $437232.16025 rounded off to $437232.16
Answer:
[a]. 10560, [b]. 14160, [c]. 7668.
Explanation:
[a]. In order to be able to solve this particular question we have to consider what is known as LINEAR PROGRAMMING.
We have the assumption that the function to be equals to 10A + 9B. The first step that we need to take here is to find the constraint for the linear programming relaxation which is;
1/2A + 5/6B 600.
1/10A + 1/4B 135. Thus, A
0 and B
With the help of excel solver and graphs, that we have the profit at $18 we are going have the value of A =300 and B =420. Therefore, the optimal solution = [300,420].
Thus, we have the objective function value to be = 10,560. [that is 10 * 300 + 420 * 18}.
[b]. For option b, where the profit increases to $20, the optimal solution lies on A =708 and B =0. Hence, objective function value = 14,160[ that is 20 * 708 + 0].
[c]. Here, there is increase in the sewing operation capacity to 750 hours. Therefore, we will have the value of A = 540 and B = 252.
Thus, the objective function value = 7668.