Answer:
the weighted average cost of capital is 11.57 % .
Explanation:
Market Value of Equity = Number of Common Shares Outstanding × Market Price per share
= 30,000 shares × $15
= $450,000
Market Value of Debt = Face Value × 82%
= $280,000 × 82%
= $229,600
WACC = Ke × (E/V) + Kd × (E/V)
= 14.00 % × ($450,000/ $679,600) + 6.80 % × ($229,600/ $679,600)
= 9.27 % + 2.30 %
= 11.57 %
The company should accept the special order because it will get an additional profit of $4,000 ($12,500 - $7,500 - $1,000) for the special order. This additional profit amount can be acquired by separating the effect from the special order on each cost and sales of the company's business. The sales should increase by $12,500 ($5 x 2500 unit) amount if the job is taken and the variable cost should increase by $7,500 ($3 x 2500 unit). Lastly, the fixed cost should increase by $1,000 (the new machine).
Answer: 16 units more than social optimum.
DWL = dead weight loss = (1/2)*(Q* - Q°) 12 =96
Explanation:
Q=1200 - 4P and Q=-240 + 2P
In a free market quantity demand =quantity supplied
1200 -4P = -240 +2P
P =240
Sub P
Q* = 240
Socially optimal quantity is
Marginal social benefit (MSC)= marginal social cost(MSC), including external damage =MEC
MPC= marginal private cost =inverse of supply function
MPC = (1/2)*Q + 120
MEC=12
MSC =(MPC +MEC) = (1/2)Q +120 +12
MSC= MPB where MPB is marginal private benefit = inverse of demand functn
MPB = 300 -(1/4)Q
(1/2)Q + 132 =300 - (1/4)Q
Q° = 224
Difference btw Q* & Q° = 16 units more than social optimum.
DWL = dead weight loss = (1/2)*(Q* - Q°) 12 =96
Answer:
The optimal order quantity is 316 pounds
Explanation:
In order to calculate What daily order quantity is optimal, we have to calculate first The cost of underestimating the demand Cu and cost of overestimating demand Co
Cu = ($0.60 - $0.50)*4 = $0.40
Co = $1 - $0.80 = $0.20
Next we have to calculate the Service Level = Cu / (Cu + Co)
= 0.40 / (0.40 + 0.20)
= 0.40/0.60
= 0.6667
So, Z Value at above service level = 0.430727
Therefore, in order to calculate the Optimal Order quantity, we would have to use the following formula
Optimal Order quantity= Mean + Z Value × Std Deviation
= 301 + 37 * 0.430727
= 301 + 15.36899
= 316 pounds