FINANCIAL ANALYSIS

Financial Mathematics and Business

Financial Mathematics and Business

Question 1

Answer.1-a

Probability

Demand

EOQ

Carrying Cost

Number of orders

Ordering Cost

Total cost

20%

25,000

866

866

28.86836028

866.0508083

1732.051

40%

35,000

1025

1025

34.14634146

1024.390244

2049.39

35%

50,000

1225

1225

40.81632653

1224.489796

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 quanitity is defined as the equation which is related to the most favorable quanity which is required for a company to hold in its inventory which is given in a set up cost of the production, demand rate, and other different variables. It is done in order to minimize the variable costs of the inventotry.

Carrying Cost

The price of carrying or the holding of the inventory, it includes the cost of the storage, the maintainance (specifically for the parishable products), insurance and other intangible items such as losses which occurs due to theft or the opportunity cost.

Ordering Cost

Ordering cost os defined as the all the cost which is linked wih the preparation of the purchase order. These cost includes the cost of purchasing the telephones, onvoices, stationary and the salaries of the purchasing clerks.

Answer.1b

With the fast recovery the demand is 75000. The number of orders for the level of stock should be placed where there is fast recovery and also demand is also high. Here in this case the fast recovery has the probability if only 5 % while the demand is high so stock level and number of orders should be placed according to the recovery and the demand. Medium recovery is also good to think because in the medium recovery the probability of 40 % and the demand is also 50,000 while the fast recovery has the probability of only 5 % so it would be better for the Office trade to place the order according to the probability and the demand, it will be better because recovery is medium and demand is also 50,000 while the number or the level of the stock is 40 and also cost is medium.

Question- 2

Answer.

At the different levels of the demand, like the slow recovery has the probability of40% and the demand of 35000 hence ignoring the other demand levels and focusing on the medium recovery means that neglecting the other sources hence it will create an impact on other levels because of focusing on the 40% of the demand and remaining 60% will be ignored.

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 of properties in the area 2-bedroom £350,000; its 70% is 245,000

3-bedroom £480,000; its 70% is 336000

4-bedroom £700,000 its 70% is 490,000.

Answer.2-a

The salary of the Gareth is 63000 while the salary of the Victoria is 41250 hence on the individual the bank is lending the loan of 2.5 times of the salary per anum is (63000*2.5)=157500 while the Victoria's salary is 41250 and the amount on the salary by the ...