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Abstract
This paper follows the discounted cash flow (DCF) approach to investigate inventory replenishment problem for EOQ model with defective items taking account of time value of money. First, this paper shows that the present value of the total variable cost for the infinite planning horizon is a convex function. Second, this paper derives bounds to determine the optimal cycle time under minimum value of the present value of the total variable cost for the infinite planning horizon. Third, with these bounds, a simple algorithm is derived to help the determination of the exact optimal cycle time and optimal order quantity. Finally, a numerical example is given to illustrate the algorithm discussed in this paper.
