[thitav]

Hi this is a topic area that has always flustered me a bit perhaps you could help with this ques:
A machine costs $72000, has a max life of 3yrs and running cost each year are:
Y1 – 7200
Y2 – 9600
Y3 – 12000
Estimated scrap values are:
Y1 – 24000
Y2 – 16600
Y3 – 9300
Cost of Capital 15%

What is the equivalent annual cost if company decided to replace the machine every 2yrs

[thitav]

Took me a while to figure out the EOQ question, but once I saw where I was going wrong it made sense.

Thanks

[thitav]

Also a company has three projects which are divisible their Initial costs and NPVs are:
Project A Initial Cost – 20000 NPV 2000
Project B Initial Cost – 30000 NPV 2400
Project C Initial Cost – 10000 NPV 1200

Available capital is 40000
I got PIs as follows:
Project A 1.1
Project B 1.08
Project C 1.12

When ranking these, what would I have to do in order to find the maximum NPV achieved if I can only do part of a project.

[thitav]

Hi, recalculated your answer for my question one and found 15.80% because you were suppose to divide 365 by the 25 before you raise the interest.

Also could you please explain this question to me I seem to be going wrong somewhere:
PQR has demand of 7500 per month. Each unit costs $5, ordering costs are $100 per order and annual holding costs are 10% of purchase costs. Lead time is 30 days between placing an order and receiving a delivery. If they order EOQ each time, at what level of inventory should a new order be placed (to nearest unit).

Already found EOQ to be 6000 but seem to be messing up with reorder level calculation.

[thitav]

Thanks your reply was most helpful.

[thitav]

Hi my name is Teena, if this is a study group for F7 INT count me in, I am in a different time zone UK 7pm is 12am my time so i may pop in from time to to depending on work constraints but please feel free to email me. thitae@hotmail.com

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