Assume that the capital requirement of "Purchase new equipment" in Year 3 is 3000. Suppose that if basic research is carried out, the advertising campaign must also be conducted. Add this constraint to your model and find the new optimal solution. What is the optimal revenue?
Assume that the capital requirement of "Purchase new equipment" in Year 3 is 3000. Suppose that if basic research is carried out, the advertising campaign must also be conducted. Add this constraint to your model and find the new optimal solution. What is the optimal revenue?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Assume that the capital requirement of "Purchase new equipment" in Year 3 is 3000.
Suppose that if basic research is carried out, the advertising campaign must also be conducted. Add this constraint to your model and find the new optimal solution.
What is the optimal revenue?
Transcribed Image Text:5. Investment Net Present Value. Spencer Enterprises is attempting to 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 summarized as follows:
Alternative
Limited warehouse expansion
Extensive warehouse expansion
Test market new product
Advertising campaign
Basic research
Purchase new equipment
Capital funds available
Net Present Value ($)
4,000
6,000
10,500
4,000
8,000
3,000
Capital Requirements ($)
Year 1 Year 2 Year 3
4,000
3,500
5,000
1,800
4,000
900
8,750
3,000
1,000
2,500
3,500
6,000
4,000
2,000
1,500
5,000 1,000
1,000
500
10,500 7,000
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