). Omwami Star Enterprises is a distributor of car spare parts to retail shops. It buys its spare parts from several manufacturers. The spare parts are ordered in lot sizes of 200 and each order costs shs. 500 to place. Demand from retail shops is 300, 000 spare parts per month and the carrying cost is shs. 20 per spare part per month. Required: (i). What is the optimal order quantity with respect to so many lot sizes? (3 MARKS) (ii). If a safety stock of 2, 000 spare parts is desired what is the total relevant costs? (3 MARKS) (iii). A certain manufacturer offers a discount of 3% for purchases of 60 lot sizes or more. Should the discount be taken? (Assume that each spare part costs shs. 200). (3 MARKS) (b). Compute the market value of the firm, value of shares and average cost of capital from the following information: shs Net Operating Income 200, 000 Total Investment 1, 000, 000 Equity capitalization rate (i). If the firm uses shs. 400, 000 debentures 11% (5 MARKS) (c ). The management of STAR Ltd has developed the following Income Statement based on the expected sales volume of 100,000 units. Shs Sales (100,000 units at shs.9) 900,000 Less: Variable costs (100,000 units at shs. 5) 500,000 Contribution 400,000 Less: Fixed costs 280,000 EBIT 120,000 In a period of 1 year, the EBIT increases from shs. 120,000 to shs. 160,000, EPS increases from shs. 1.75 to shs. 2.55, when it employs 50 per cent debt and pays interest charges of shs. 37,000. Required: (i)Calculate the degree of combined leverage (6 MARKS