Discuss the assumptions of the economic order quantity (EOQ) model and its objective
1 . Demand for the product is constant and known with certainty.
2 . The lead time is known and constant.
3 . All inventories in the order arrive at the same time.
4 . The total cost per year of placing orders is a variable that decreases as quantities ordered increases.
5 . The total cost per year of holding inventories (carrying costs) is a variable that increases as the quantities ordered increase.
6 . There are no quantity discounts.
The objective of the EOQ model is to reduce total inventory costs.
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Which one of the following statements is NOT correct?
A) A leveraged firm is more risky than a firm that is not leveraged. B) A leveraged firm is less risky than a firm that is not leveraged. C) A firm that uses debt magnifies the return to its shareholders. D) All of the above statements are correct.
Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
Old Equipment New Equipment Purchase price $225,000 $375,000 Accumulated depreciation 90,000 - 0 - Annual operating costs 300,000 240,000 If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. What is the net cost of the new equipment? a) $375,000 b) $315,000 c) $150,000 d) $75,000