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3 years ago

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost. True False

Business

1 answer:

vova2212 [387]3 years ago

3 0

Answer:

True

Explanation:

As the purchase cost is the variable cost that is the variable cost of the goods is expressed as the purchase units price x annual demand quantity and is P into D. And the holding cost is the average quantity in stocks and is q/2 and is given as H x Q / 2. Thus Q is an independent and is a function of the K, D, h

Hence the E.O.Q is given as Q = √2 Dk / h

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3 years ago

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LekaFEV [45]

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3 years ago

you are considering a project with an initial cash outlay of $80,000 and expected free cash flow of $20,000 at the end of each y

alexgriva [62]

Answer:

Payback period: 4 years

NPV: $87,105

PI: 1.089

IRR: 12.98% (rounded to 2 decimal places)

Explanation:

Payback period is the time taken to recover the initial capital outlay of an investment assuming no interruption of anticipated net cash flow or free cash flow. Computed by dividing initial investment by the anticipated cash flow per year. ($80, 000/$20, 000) = 4 years

Net Present Value (NPV) e is used to analyse the profitability of an investment by discounting future anticipated cash flows. The formula for computing NPV is: [(Cash flows)/(1+r)i] where cash flows is the anticipated cash flow each year,, r is the discount rate, in this case, required rate of return and the i indicated the time period. The NPV is calculated as: [(20,000/(1.1) +20,000/(1.1)^1 +20,000/(1.1)^2 +20,000/(1.1)^3 +20,000/(1.1)^4 +20,000/(1.1)^5 + 20,000/(1.1)^6] = $87, 105

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Internal Rate of Return (IRR) makes the present value of the project equal to zero. The higher the IRR , the more profitable the project. In this case, the most accurate way this value can be computed is by using a calculator and computing the IRR. N (time period) = 6 , PV(present value of initial investment) = -80, 000, PMT (cashflows per year) = 20,000 Comp I/Y (rate of return) = 12.978%

The variables computed above indicate that undertaking this project would be profitable for the company.

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3 years ago