A company is planning its capital budget over the next several years. There areeight potential projects under consideration. A calculation has been made of the expected netpresent value of each project, along with the cash outflow that would be required over the nextfour years. These data, along with the cash that is available each year, are shown in the tablebelow. (If any of the cash available in a given year is not fully used for these projects, it willbe used in other ways and so will not be available in later years.) There also are the followingspecial constraints: (a) at least one of project 1, 2, or 3 must be done, (b) project 6 and 7cannot both be done, and (c) project 5 can only be done if project 6 is done. The objective isto determine which projects should be pursued to maximize the total expected net presentvalue.Year 1Year 2Year 3Year 4NPV(Smil)Cash Outflow Required (Smillion)Project121322232110 123560372234233054211 15 24 1730433222Formulate a BIP model in algebraic form for this problem72361168∞542542218CashAvailable(Smillion)20202020

BIP stands for Binary Integer programming. It isa special case of LPP wherein the decision variable holds are value of 1 or 0. 1 means presence of decision vairbale in the system while 0 means otherwise.

Answered: A company is planning its capital…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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