Suppose That Last Year You Borrowed $100 at 5 Percent

question 72

Multiple Choice

Suppose that last year you borrowed $100 at 5 percent interest to purchase a $100 pair of Nike cross-training shoes. This year you repaid the bank with interest. If the inflation rate was 10 percent last year, your purchase of the shoes would:

• A) make you an inflation winner as you saved $5 on the shoes.
• B) make you an inflation loser as you paid $5 more than you should have for the shoes.
• C) not be affected at all by the inflation rate.
• D) be taxed according to COLA adjustments.
• E) make you an inflation loser because of bracket creep.

Recognize the benefits of quick response and tailored sourcing in supply chain management.

Evaluate the effects of forecast accuracy and lead time on supply chain performance.

Understand the relationship between forecast error (standard deviation) and its impact on expected profit and understock.

Grasp the concepts of optimal order quantity and capacity considerations in single and multiple product ordering.

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Definitions:

Improve NPV

Strategies or steps taken to increase the Net Present Value of an investment, thereby enhancing its profitability.

Lower Risk

Investments or actions that are considered to have a lower likelihood of resulting in a loss.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, essentially how much it costs a company to use funds for projects or business activities.

Replacement Projects

Investments made to replace outdated or aged assets to maintain or improve the efficiency of operations.