The present value of the offer is $739,018.03 The cash flows mentioned, spanning from the end of year 1 to the end of year 20, form a growing annuity for 20 years. The present value formula for a growing annuity is as follows: PV= where P represents the annuity payment in the first year, i is the interest rate per period, g is the growth rate, and n denotes the number of payment periods. The first year’s P is the base salary of $59,000 along with a 10% bonus of $5,900, totaling $64,900; g is 3.9%; i=0.1, and n=20. The present value of the offer equals 15,000 received immediately plus the present value of the growing annuity = 739,018.03.
The equilibrium quantity after adjusting the demand curve yields Q = 10.
(i) The units to be ordered each time: 2,828 units. (ii) Average inventory will be 1,414 units. (iii) With an increase in lead time, the minimum stock requirements will be less than the EOQ, thus extending lead time won't alter the EOQ.
Response:
-11.8%
Clarification:
to resolve this problem, it's important to keep in mind that a bond's worth is primarily determined by figuring out the present value of its cash flow sequence. Therefore, consider a bond in terms of you being the creditor; you would earn interest from the loaned amount (the coupon), and after n years, you'd receive back the initial amount lent (the principal). Applying the relevant formula, we get the value of the bond as follows:
in this specific scenario, there are 29 years left until it matures after one year, thus we have:
given that the interest rate is higher, the return on the investment is as follows:
Answer:
Option (E) is the correct answer.
Explanation:
Labor productivity will increase by 50%.
Currently, productivity is at 5000 pairs per worker; with the productivity boost, it will rise to:
= 5,000 × (1 + 50%)
= 7,500.
Total annual pay stands at $40,000.
Cost per unit with higher productivity:
= Total pay ÷ New productivity level
= 40,000 ÷ 7,500
=
$5.33.
Thus, labor costs per unit produced will decrease from $8.00 to $5.33 for a facility in North America.
