FMBs 2013/14 Financial Mathematics And Business Statistics C

Fmbs 201314financial Mathematics And Business Statistics Coursework

Fmbs 201314financial Mathematics And Business Statistics Coursework

Fmbs 201314financial Mathematics And Business Statistics Coursework

This coursework tests your basic financial mathematics and statistical modelling skills, using spreadsheet software (Excel – formulae, financial maths, graphical features, Data Analysis and Solver tools) as well as your awareness of how financial products work. Your answers are to be presented in an essay/report format, which you will produce using a word processor. In your report, you should:

• State and explain all assumptions on which your answers are based;
• Clearly indicate your answers and recommendations;
• Support your answers with appropriate calculations to arrive at them;
• Include selected printouts of the formulae underlying computed values.

Although you will submit an Excel file with calculations, your report must be a self-contained document. A reader should not need to consult the Excel file to understand your analysis, findings, and recommendations. Adequate referencing of Excel calculations within your report is essential, mentioning specific cells, ranges, or sheets when relevant. Your report should not exceed 10 pages, including Appendices, and should be concise and focused.

The quality of presentation accounts for 10% of the total mark. The coursework deadline is 5:00 pm on Monday, 14th March 2014, and submissions must include a Word document of your report and an Excel file of your calculations.

Paper For Above instruction

Question 1: Inventory Management and Cost Savings

Dreamcatcher, a games retailer, is reassessing its stock ordering system following a reduction in ordering costs from £280 to £190 per order, and considering economic scenarios with varying demand levels. The company manages similar-sized games as a single product, with an average carrying cost of £1.45 per unit. The expected demand scenarios and their probabilities are as follows:

• Crisis continues: 20%, demand = 40,000 units
• Slow recovery: 15%, demand = 40,000 units
• Medium recovery: 50%, demand = 40,000 units
• Fast recovery: 15%, demand = 40,000 units

Assuming demand is 40,000 units in all scenarios, and given the updated ordering cost and carrying cost, recommend the optimal order frequency and order size. Then, evaluate the savings achieved through the renegotiated supplier cost. Finally, assess how these recommendations and savings would perform under different demand levels or economic scenarios.

Question 2: Production Optimization in Electrical Appliances

A manufacturing company produces microwave ovens with three quality levels: Cheap (£50), Average (£100), and Premium (£250). The production process involves four stages: Forming, Machining, Assembly, and Testing, each with specified hourly costs and maximum available hours per machine. The detailed data is as follows:

The market research indicates demand limits of 2000 units (Cheap), 1200 units (Average), and 700 units (Premium). Determine the optimal production quantities and marketing strategy by formulating and solving this as a linear programming problem using Excel’s Solver. Analyze changes if maximum demand drops to 1,000 for Premium or machine hours reduce to 20,000. Provide a recommended production plan for the company.

Question 3: Mortgage Affordability Analysis for a New Flat

John and Julia plan to buy a flat, with their financial details as follows:

• John’s annual salary: £39,000; Julia’s: £37,500 plus a £5,000 bonus
• Savings: £25,000
• John owns a flat valued at £150,000 with an outstanding mortgage of £112,000; he plans to sell and buy a new property.
• Desired mortgage term: 25 years

The target property options and mortgage rates are as follows:

• Fixed 2-year rate at 3.69%; then revert to 5.7%
• Fixed 5-year rate at 4.29%; then revert to 5.7%
• Interest-only at 5% for the life of the loan, with an investment fund earning 3.9% to cover repayments

Estimate the maximum possible borrowing within the best rate and advise on an appropriate borrowing amount based on their financial situation. Recommend an optimal mortgage type for them and analyze how interest rate fluctuations up to three percentage points would influence your advice.

Question 4: Statistical Relationship Between Study Hours and Exam Results

A statistician has generated random data for study hours and exam grades in two subjects: Quantitative Methods and Accounting. The data is summarized as follows:

Perform the following analyses:

• Summarize the distribution of expected grades for each subject and discuss key data characteristics.
• Construct 95% confidence intervals for mean exam scores in both subjects; assess whether differences are statistically significant.
• Discuss whether the actual exam results are likely to mirror these patterns and how exam question formats might influence outcomes.

Question 5: Investment Appraisal for Garnett PLC

Following declining sales, Garnett plc is considering two investment options before its key sales period in September:

• Option A: £4 million for incremental improvements, expected short-term cash flows.
• Option B: £15 million for a complete redesign, with longer-term cash flows.

The company requires a 10.25% rate of return and has estimated cash flows over several years. Evaluate the investment options by discussing various appraisal methods, including payback period, NPV, and IRR. Decide which project meets their criteria and consider how potential export opportunities starting in year 5 could influence your recommendation.

References

• Bagshaw, M. (2008). Business Mathematics and Statistics. Oxford University Press.
• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
• Evans, J. R., & Lindner, C. (2012). Statistics: The Exploration and Analysis of Data. Brooks/Cole.
• Hillier, D., & Ross, S. (2010). Corporate Finance. McGraw-Hill Education.
• ISO 9001:2015 Quality Management Systems — Requirements. (2015). International Organization for Standardization.
• Lee, S. M., Trimi, S., & Kim, C. (2013). Innovation for sustainability: A case study of Hyundai Motor Company. Management Decision, 51(8), 1674-1690.
• Lucias, S. (2007). Business Mathematics with Applications. Pearson Education.
• Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance. McGraw-Hill Education.
• Watkins, A., & McGowan, P. (2004). Teaching Business Mathematics and Statistics. Journal of Teaching in Business, 54(2), 101-108.
• Wooldridge, J. M. (2013). Introductory Econometrics: A Modern Approach. Cengage Learning.