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Assume All Conditions in Question 1 Hold,except That Low's Supplier

question 56

Essay

Assume all conditions in question 1 hold,except that Low's supplier now offers a quantity discount in the form of absorbing all or part of Low's order processing costs.For orders of 750 or more kegs of nails,the supplier will absorb all the order processing costs; for orders between 249 and 749 kegs,the supplier will absorb half.What is Low's new EOQ?


Definitions:

Interest Tax Shield

The tax savings achieved by deducting payable interest on debt from taxable income, thereby reducing the overall tax expense.

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