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More Practice Questions _Inv.Mgt 2011_Ans_Revised

# More Practice Questions _Inv.Mgt 2011_Ans_Revised -...

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Questions for Review Session-EMBA30_Revised Problem 6.6 Anu What is the optimal \$ a bank put in its ATM? Given that: Fixed cost of filling an ATM m/c (S) = \$100. Average withdrawal: \$80 and 150 transactions per year Interest rate 10% pa simple, (No withdrawal fee) So unit holding cost, H = \$0.10 / year (remember the bank is paying its depositors 10% on the money that sits in the ATM, cannot lend out that money locked up in the ATM, and does not charge a withdrawal fee) So annual demand R (D in our formula) is estimated to be = 150*80 = 12,000. Then, the economic quantity of money to place in the ATM machine, everytime the bank replenishes the ATM, is given by the EOQ formula: The number of times the ATM needs to be filled = R/Q = 12000/4898 = 2.45 per year. Problem 7.3 Anu 7.3 The Home and Garden (HG) chain of superstores imports decorative planters from Italy. Weekly demand for planters averages 1,500 with a standard deviation of 800. Each planter costs \$10. HG incurs a holding cost of 25% per year to carry inventory. HG has an opportunity to set up a superstore in the Phoenix region. Each order shipped from Italy incurs a fixed transportation and delivery cost of \$10,000. Consider 52 weeks in the year.

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More Practice Questions _Inv.Mgt 2011_Ans_Revised -...

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