2015dec Fin-301-Ol010 – Written Assignment 7

2015DEC FIN-301-OL010 – Written Assignment 7 – Victor Moruzzi

Chapter 25 – 3.

a. EOQ= 2(5,000)($5)$3.50=119.52=120

b. EOQ will last = 5000 / 365 = 13.69 units sold per day

120 / 13.69 = 8.76 = 9 days

Orders placed annually = 5000 / 119.52 = 41.94 = 42

c. EOQ= 2(5,000)($5)$1.80=166.66=167

Orders placed annually = 5000 / 166.66 = 30

Chapter 25 – 4.

a. EOQ= 2(30,000)($60)$1.50=1,549.19=1,549

b. Average inventory = 1,549 / 2 + 300 = 1,074.50

c. Maximum inventory = 1,549 + 300 = 1,849

d. Orders per year = 30,000 / 1,549 = 19.36 = 19

Chapter 25 – 14.

76,789(1+i)0821 = 77,345

(1+i)0821= 77,345 / 76,789 = 1.00724

1.0917 – 1 = 9.17

The rate of interest earned and the rate of interest paid is the same.

Chapter 26 – 2.

Interest payment = 65,000 x .10 x 120 / 360 = 2,166.66

Origination fee = 65,000 x .015 = 975

Rate of interest = 3,142/61,858 x 360/120 = 15.23%

Chapter 26 – 5.

10% discount = 1,000/9000 x 360/360 = 11.10%

11% straight loan = 1,100/10,0000 x 360/360 = 11%

The 11% straight loan is more expensive.

Chapter 26 – 6.

3% cash discount = .031- .03 x 36045-15 = .0309 x 12=37.08%

2% cash discount = .021- .02 x 36030-10 = .0204 x 18=36.72%

The 3% cash discount loan is slightly more expensive.

Chapter 26 – 9.

Simple rate = 17,500982,500 x 129= .0178 x 1.3333=2.37%

Compound rate =(1,000,000/982,500)365/270-1=2.42

Chapter 26 – 11.

a. Entire year –

Bank A = 800,00010,000,000 x 1212= .08 x 1=8%

Bank B = 660,00010,000,000-200,000 x 1212= .0673 x 1=6.73%

Bank B offers the best terms.

b. Three Months -

Bank A = 237,50010,000,000 x 123= .02375 x 4 =9.5%

Bank B = 165,00010,000,000-200,000 x 123= .0168 x 4 =6.72%

Bank B offers the best terms.