A couple received a $131,000 inheritance the year they turned 48 and invested it in a fund that earns 6.1% compounded semiannual
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The answer is
Calculate the expected return using CAPM approach as follows:
How to calculate the price at the end of the year?
Price at the end of year = Price today Expected return
The dividend is deducted from the price at the end of year as after the dividend declaration the stock price tend to reduce. Calculate the expected selling price of share as follows:
Expected selling price = Price at the end of year - Dividend
Therefore, the expected selling price of share is .
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Given:
Annual Demand(D) = 200,000 × 12 = 2,400,000 units
Cost per order(S) = $500 per order
Holding cost(H) = 20% of Unit cost = $10 × 20% = $2
Unit cost =$10
Computation:
1) Optimal Order size =
Optimal Order Size=
2)
Annual holding cost = (34,641 / 2) × 2
Annual holding cost = $34,641
3) Number of Order per year = Annual demand / Optimal Order Quantity
Number of Order per year = 2,400,000 / 34,641
Number of Order per year = 69.2820646
Number of Order per year = 69 order (Approx)
4) Annual variable transportation cost = Transportation per unit × Annual Demand
Annual variable transportation cost = $0.10 × 2,400,000
Annual variable transportation cost = $240,000
5) Annual Clerical Cost = Number of Order per year × Cost per Order
Annual Clerical Cost = 69.282 × $500
Annual Clerical Cost = $34,641