Analysis of Capital Budgeting Decision: NPV, IRR and Pay-back

The company is looking forward to add-up additional sales of $28,000 with the service of process of new machine so as to expand the market place sales per year. The inventory has to be incrementd in give to expand the sales and at that place is a concurrent reducing in the cash ascend due to such an increase in the inventory. On the other hand, the cash flow from in operation(p) activities would increase due to the increase in sales. Therefore, with the increase in the cash from operating activities, the decrease in the cash flow will be counterbalanced. This is due to the reason that the sales of the growth will increase with the increase in inventory and thus, there will be an increase in the revenues from the sales.

Inventory ManagementA square(a) amount of funds is to be excluded from the inventories as they are kept up(p) in large sizes in the firms. Therefore, in order to revoke unnecessary investment in the firms, it is very crucial to command the inventories efficiently and effectively. A firm may fail on the whole if it neglects the inventory management. This will also create a panic to the long-run profitability of the firm. The calculation of Economic Order total (EOQ), the safety stock and the range point are include in the techniques of the inventory management.



In order to effectively nail down the optimum level of inventory, these inventory management techniques play a significant role (Pandey, 2007).

EOQ = ?2AO/cHere,c = carrying cost, A = quantity required and O = ordering cost.

The answers of the two questions required to be attempted so as to effectively manage the inventories. The first question is answered with the second of EOQ while the second question is answered with the help of reorder point. The reorder point may be defined as the level of...

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