MATHEMATICAL METHODS 1. Finding An Initial Basic Feasible Solution: An initial basic feasible solution to a transportation problem can be found by any one of the three following methods: I. North West Corner Rule II. The Least Cost Method III. Vogel’s Approximation Method 1. North West Corner Rule The North West corner rule is a method for computing a basic feasible solution of a transportation problem‚ where the basic variables are selected from the North-West Corner
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decision is that which varies among the possible courses of action being considered. Costs‚ revenues‚ and other factors that do not vary among possible courses of action are not relevant to the decision. In addition to quantitative information‚ many non-financial factors must be taken into consideration. It would be irresponsible and short- sighted for managers to seek solutions and base decisions entirely on revenue and cost figures. Most business decisions also require an examination of legal issues‚
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of $150‚000 at the end of each of five years if the reasonable formula‚ opportunity cost of using funds is 9 percent? The maximum you would be willing to pay for this asset is the present 2 points for the value‚ which is correct result 150‚ 000 150‚ 000 150‚ 000 150‚ 000 150‚ 000 + + + + 2 3 4 1 + 0.09 (1 + 0.09) (1 + 0.09) (1 + 0.09) (1 + 0.09)5 = $583‚ 447.69. PV = 6 points 3. Suppose that the total benefit and total cost from an activity are‚ respectively‚ given by the following equations: B(Q)
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12 Competitive Advantage Competitive Strategy and Game Theory Economic Value Added (or Economic Profit) • Net operating income less a charge for the cost of capital that is employed to produce the income. • EVA = NOPAT − WACC × Capital (1) where NOPAT is net operating profit after tax‚ and WACC is the weighted average cost of capital to the firm‚ an implicit market price that reflects the risk to the supplier of finance. Competitive Strategy and Game Theory Economic Value
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book the Rate of Interest that led me to adopt the catchword “investment opportunity” as a substitute for the inadequate term “productivity” which had come into general use. This combined with my early “impatience theory” led to the impatience and opportunity theory which can be said to be distinct from all other theories of interest because it explicitly analyzes opportunity and fits together impatience and opportunity and income. The income concept plays the basic role in the theory of interest
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What is the maximum amount you would pay for an asset that generates an income of $150‚000 at the end of each of five years if the opportunity cost of using funds is 9 percent? A2: We must determine the PV of the $150‚000 over the 5 years. PV= (150000/1.09^1)+(150000/1.09^2)+(150000/1.09^3) +(150000/1.09^4)+(150000/1.09^5) = $583‚447.69 Therefore‚ if costs exceeded $583‚447.69‚ then the asset would not be worth the price. Q8: Jaynet spends $20‚000 per year on painting supplies and
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resources are fully employed. 4. The resources are efficiently employed. 5. The resources are not equally efficient in production of all products. Thus if resources are transferred from production of one good to another‚ the cost increases. In other words marginal opportunity cost increases. The last assumption needs explanation because it determines the shape of the PP curve. If this assumption changes‚ the shape changes. Efficiency in production means productivity i.e. output per unit of an input
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Chapter #19‚ Quizz Quizz‚ Chapter 19 1.Calculate the weighted-average cost of capital (WACC) for Federated Junkyards of America‚ using the following information: • Debt: $75‚000‚000 book value outstanding. The debt is trading at 90 percent of par. The yield to maturity is 9 percent. • Equity: 2‚500‚000 shares selling at $42 per share. Assume the expected rate of return on Federated’s stock is 18 percent. • Taxes: Federated’s marginal tax rate is Tc = .35 What are the key assumptions
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operations‚ upgrade physical and financial resources and increase profitability in order to sustain consumer interest‚ confidence and loyalty? III. Areas of Consideration/Key Success Factors [in table form] Strengths Weaknesses Opportunities Threats Established customer base (S) Investments made in good condition machinery (S) Only 1 million pesos generated in company sales despite being in the business for 25 years (W) Expected boost in printing industry (O) International market
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Risks: • Individual debt from College/Graduate school would be added onto by the purchase of Icedelights franchise for Florida • Time commitment that might take all three individuals away from completing their MBA’s at Harvard • Additional opportunity costs of missing out on a almost-guaranteed job with a good company‚ salary‚ and title - post-graduation • Icedelights is more expensive for a new and unproven franchise • Giving up more than 25% percent of the company just to get investors interested
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