D G H K. 1 Capital budgeting model Range names used Budget Decisions -MadellSB$10:SH$10 Total cost =ModellSB$14 Total NPV -MadellSB$17 2 =ModellSD$14 3 Input data on potential investments ($ millions) 4 Investment 5 Cost 3. $.0 $2.4 $3.5 $5.9 $6.9 $4.5 $3.0 6 NPV 7 ROI $5.6 $2.7 $3.9 11.4% $6.8 15.3% $7.7 11.6% $3.3 10.0% $5.1 12.0% 12.5% 13.3% 9 Decisions: whether to invest 10 1 if yes, O if no 11 12 Budget constraint 1 13 Total cost Budget 14 $14.9 $15 15 16 Objective to maximize 17 Total NPV $16.7
D G H K. 1 Capital budgeting model Range names used Budget Decisions -MadellSB$10:SH$10 Total cost =ModellSB$14 Total NPV -MadellSB$17 2 =ModellSD$14 3 Input data on potential investments ($ millions) 4 Investment 5 Cost 3. $.0 $2.4 $3.5 $5.9 $6.9 $4.5 $3.0 6 NPV 7 ROI $5.6 $2.7 $3.9 11.4% $6.8 15.3% $7.7 11.6% $3.3 10.0% $5.1 12.0% 12.5% 13.3% 9 Decisions: whether to invest 10 1 if yes, O if no 11 12 Budget constraint 1 13 Total cost Budget 14 $14.9 $15 15 16 Objective to maximize 17 Total NPV $16.7
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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Change the capital budgeting model in Figure 6.5 so that 80% of each cost in row 5 is incurred right now, at the beginning of year 1, and the other 20% is incurred a year from now, at the beginning of year 2. You can assume that the NPVs don’t change. The available budget in year 1 is $11.5 million, and the budget in year 2 is $3.5 million.
a. Assuming that available money uninvested in year 1 cannot be used in year 2, what combination of investments maximizes
b. Suppose that any uninvested money in year 1 is available for investment in year 2. Does your answer to part a change?
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