1) XYZ Ltd. manufactures a product which has the monthly demand of 4,000 units. Product needs a component X which is purchased at $20. For every finished product one unit of component is required. Ordering cost is=$120 per order and the holding cost is 10% per annum.
You are needed to compute:
(a) Economic order quantity
(b) If minimum lot size to be supplied is 4, 000 units, determine the extra cost, the company has to acquire?
(c) What is the minimum carrying cost, company has to acquire?
2) Firm with the WACC of 10 percent is considering given mutually exclusive projects:
Year 0 1 2 3 4 5
A -400 55 55 55 225 225
B -600 300 300 50 50 49
Which project would you suggest via payback period rule if Maximum acceptable payback for it is= 4.7 years? NPV rule? Or via IRR rule? Describe which rule is best and describe why?
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