Formulation Of The Problem

Let W(t) = working capital finance required by a borrowing company, expressed as a function of time, over the next one year,
x = level of demand loan or fixed component,
W(t) – x [where W(t) > x] = level of variable component,
I = Interest burden for the company for the next one year
a = Rate of interest for the fixed component
(a + b) = Rate of interest for the variable component