8. Spencer Enterprises must choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are sum- marized as follows: Net Present Capital Requirements ($) Alternative Value ($) Year 1 Year 2 Year 3 Limited warehouse expansion 4,000 3,000 1,000 4,000 Extensive warehouse expansion 6,000 2,500 3,500 3,500 Test market new product 10,500 6,000 4,000 5,000 Advertising campaign 4,000 2,000 1,500 1,800 Basic research 8,000 5,000 1,000 4,000 Purchase new equipment 3,000 1,000 500 900 Capital funds available 10,500 7,000 8,750 a. Develop and solve an integer programming model for maximizing the net present value.
8. Spencer Enterprises must choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are sum- marized as follows: Net Present Capital Requirements ($) Alternative Value ($) Year 1 Year 2 Year 3 Limited warehouse expansion 4,000 3,000 1,000 4,000 Extensive warehouse expansion 6,000 2,500 3,500 3,500 Test market new product 10,500 6,000 4,000 5,000 Advertising campaign 4,000 2,000 1,500 1,800 Basic research 8,000 5,000 1,000 4,000 Purchase new equipment 3,000 1,000 500 900 Capital funds available 10,500 7,000 8,750 a. Develop and solve an integer programming model for maximizing the net present value.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:8.
Spencer Enterprises must choose among a series of new investment alternatives. The
potential investment alternatives, the net present value of the future stream of returns,
the capital requirements, and the available capital funds over the next three years are sum-
marized as follows:
Net Present
Capital Requirements ($)
Alternative
Value ($)
Year 1
Year 2
Year 3
Limited warehouse expansion
4,000
3,000
1,000
4,000
Extensive warehouse expansion
6,000
2,500
3,500
3,500
Test market new product
10,500
6,000
4,000
5,000
Advertising campaign
4,000
2,000
1,500
1,800
Basic research
8,000
5,000
1,000
4,000
Purchase new equipment
3,000
1,000
500
900
Capital funds available
10,500
7,000
8,750
a. Develop and solve an integer programming model for maximizing the net present
value.
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