FINANCIAL ANALYSIS

Financial Mathematics and Business

Financial Mathematics and Business

Question 1

Answer.1-a

Probability of the stock recovery

Demand

EOQ( Economc Order Quanitity)

Carrying Cost

Number of orders

Ordering Cost

Total cost

20%

25,000

866

866

28.86836028

866.050808

1732.05

40%

35,000

1025

1025

34.14634146

1024.39024

2049.39

35%

50,000

1225

1225

40.81632653

1224.48979

2449.49

5%

75,000

1500

1500

50

1500

3000

Carrying Cost

2

Cost per unit

30

Formula

Economic Order Quantity

(2 * cost per order * demand/ cost per unit = Economic order quantity



Carrying Cost

C * Q/2

Ordering Cost

F * D/Q

Total cost

C *Q/2+F*D/Q

Economic Order Quantity

Economic order quantity (EOQ) is defined as the equation that is related with the most favorable quanitity which is necessaraily required by the company to hold the inventory given as the setup cost for the production, the rate of demand, and different other variables. The economic order quanitity minimizes the variable cost of the inventory.

Carrying Cost

The carrying cost is simply the price or the cost of holding the inventory or carrying the inventory, which might includes the storage cost, the maintainance of the inventory for instance the parishable items or the products insurance and other items like intangible products such as losses which occurs because of the the opportunity cost.

Ordering Cost

Ordering cost is defined as the total cost or the cost of everything with the manufacturing of the purchase order and these cost includes the cost of purchasing th telephones, onvoices, stationary and salaries for the purchasing of the clerks.

Answer.1b

In the question the demand for the fast recovery is 75000, The number of the orders should be placed in accordance with the recovery where the mode or the duration of time for the recovery is less and the demand is high. (Baker,et.al,1986) Here in this case the demand for the fast recovery is 75000 where as the probability is 5% where as the demand is high and the recovery of the demand is only 5% but the demand of the product is high. Since there are less chances of the recovery hence it should not be selected as there are only 5% chances of the recovery.The medium recovery has the demand of 40% and the demand is 50000 and on the other hand the fast recovery has the probability of 5% so it is better to go with the medium recovery because the probability is 40%, the cost is medium and the probability is 40% of recovery whiel on the other hand the 35% chances of the probability for the demand of 50000 and the cost is above the medium recovery hence it is better fot the Office trade to go with medium recovery where the demand is 40000.

If only At the different levels of the demand like the medium recovery has the 40% chances and the demand is 35000 hence neglecting the other demand levels and keep concentrating on the medium recovery where as 40% is focused than remaining 60% will be affected hence the Company should go for the products with less cost and the maximum EOQ.

Question- 2

Answer.

Gareth's current salary is £63,000 p.a. and Victoria's £41250 per anum.

Value of current property is £220,000 and

Current Outstanding is £140,000

Net balance is £80,000

Their saving is £65,000

Total balance £145,000

Bank will lend up to 70% of the property price

The average price ...