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To: Colin who wrote (3650)2/5/1999 7:51:00 PM
From: Savant  Read Replies (2) of 4201
 
profit maximization condition for purchasing capital given inflation, depreciation, interest rate and cost per widget and all put into real terms from nominal dollars?
...Simple version....minimize inventory utilizing just in time shipping..........of course you run the risk of running out in rush periods....pissing off your customers..and losing all the business you built up over forty years.
profit maximizes as time approaches zero because cost of interest and depreciation increase proportionate to time ...inflation could be a null factor assuming you are able to increase the cost of the widget directly proportionate to time...if you can increase cost of widget faster, then time on shelf becomes less of a factor..if cost of widget cannot be increased or if competition causes a decrease in price, then time on shelf becomes extremely critical, and must approach zero in a hurry.
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