Answer:
when sea transportation is used:
safety stock = Z-score x √lead time x standard deviation of demand
- Z-score for 99% = 2.58
- lead time = 36 days
- standard deviation of demand = 4,000 units
safety stock = 2.58 x √36 x 4,000 units = 61,920 units
reorder point = lead time demand + safety stock
- lead time demand = 36 days x 5,000 units = 180,000 units
- safety stock = 61,920
reorder point = 180,000 units + 61,920 units = 241,920 units
when air transportation is used:
safety stock = Z-score x √lead time x standard deviation of demand
- Z-score for 99% = 2.58
- lead time = 4 days
- standard deviation of demand = 4,000 units
safety stock = 2.58 x √4 x 4,000 units = 20,640 units
reorder point = lead time demand + safety stock
- lead time demand = 4 days x 5,000 units = 20,000 units
- safety stock = 20,640
reorder point = 20,000 units + 20,640 units = 40,640 units
Answer: 11.65%
Explanation:
First find cost of equity using CAPM:
= Risk free rate + Beta * Market risk premium
= 3.4% + 1.37 * 8.2%
= 14.6%
Debt to equity = 0.45
This means that weight of debt is:
= 0.45 / (1 + 0.45)
= 31.03%
Weight of equity:
= 1 - 31.03%
= 68.97%
WACC = (Weight of equity * cost of equity) + (weight of debt * cost of debt * (1 - tax))
= (68.97% * 14.6%) + (31.03% * 7.6% * (1 - 34%))
= 11.63%
= 11.65% as per options
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