Information on a Prospective Investment for Wells Financial Services Is

question 22

Essay

Information on a prospective investment for Wells Financial Services is given below. $$\begin{array} { l | c c c c } && { \text { Period } } \\& 1 & 2 & 3 & 4 \\\hline \text { Loan Funds Available } & 3000 & 7000 & 4000 & 5000 \\\text { Investment Income } & & & & \\\text { (\% of previous period's investment) } & & 110 \% & 112 \% & 113 \% \\\text { Maximum Investment } & 4500 & 8000 & 6000 & 7500 \\\text { Payroll Payment } & 100 & 120 & 150 & 100\end{array}$$ In each period,funds available for investment come from two sources: loan funds and income from the previous period's investment.Expenses,or cash outflows,in each period must include repayment of the previous period's loan plus 8.5% interest,and the current payroll payment.In addition,to end the planning horizon,investment income from period 4 (at 110% of the investment)must be sufficient to cover the loan plus interest from period 4.The difference in these two quantities represents net income,and is to be maximized.How much should be borrowed and how much should be invested each period?

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Definitions:

Sample Size

The count of data points or repeated measurements contained within a statistical sample.

Population Standard Deviation

A measure of the dispersion or spread of all individual values from the mean of a population.

Sample Size

The number of observations or experimental units selected from a population for the purposes of statistical analysis.

Population Standard Deviation

A measure of the dispersion or variation of a set of values in a population, quantifying how much the values differ from the population mean.