What Is the Formula for Calculating the Maximum Inventory Level

question 135

Multiple Choice

What is the formula for calculating the maximum inventory level?

• A) Imax = H(1-d/p)
• B) Imax = Q(1-d/p)
• C) Imin = Q(1-s/p)
• D) Imax = Q(1-d/s)
• E) Imin = Q(1-d/h)

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Definitions:

Discount Rate

The interest rate applied within the framework of discounted cash flow analysis to estimate the present value of future cash inflows.

Present Value

The present-day worth of money expected in the future or series of cash flows, calculated using a fixed rate of return.

Compounded Monthly

The process where interest is added to the principal amount each month, and future interest is earned on the increased balance.

Effective Annual Rate

The interest rate on an investment or loan that accounts for the effect of compounding over a one-year period.