ATTACHED YOU WILL FIND THE DETAILS.

Finance and Economics



Question no # 1

The seven run rule states that if seven data points in a row are all above the mean, below the mean, or are all decreasing or increasing, then the complete process needs to be examined for non-random problems. Data points that violate the seven run rule are starred. These data points may indicate that a calibration device may need adjustment. For example, the machine that cuts the wood for the rulers might need to be adjusted or the blade on the machine might need to be replaced.

Question no # 2

NPV (net present value)

It calculates the present value for all future cash flows. The discount rate varies depending upon the risk of the project such as (WACC). This technique is considered superior to the payback and ARR technique. (Don, 2007, Pp. 719- 721)The calculation of net present values is pretty important as it provides with the information required to pursue any project or not. If the net present value of a project is greater than the desired return than the company will opt for a particular project and in other case the company will not invest in a project as it feasible for the company.

Return on investment

Return on investment also commonly known as (ROI). ROI is projects net output (cost savings and or new revenue that results from a project less the total project cost). (Jack, 2003, Pp.10-45)Divided by the projects total input (total cost), and it is expressed in terms of percentage. The inputs are all of the project cost such as software, hardware, programmer's time, external consultants and trainings. Therefore if a project has an ROI of 100%, from this definition the cash benefits out of the project will be double. This ratio is pretty significant to the management as it helps the management to make decisions of whether to invest in a particular business or not.

Breakeven point

The breakeven point is the measure which tells the breakeven point of a particular project at any given time or cost. The importance of breakeven point is vital for making in decision by the management. (Michael , 2010, Pp 11-35)The break even cost of a project has a great role in any projects feasibility. The shorter the breakeven point the better it be. It is expressed in different units such as if you are calculating in terms of financial amount then it will be expressed in amounts and if you are calculating it in terms of year then it will be expressed subsequently.

Parametric modeling

Parametric modeling uses project characteristics (parameters) in a mathematical model for estimation of project costs. The level of expertise of the programmers, the complexity and the size of the data involved, and so on. Parametric models are most reliable when the historical information that was used to create the model is accurate, the parameters are easily quantifiable and the model is easy to use flexible in terms of the size of the ...